2001 (6) TMI 455 - AT - Central Excise

Summary

Issues:
- Entitlement to credit of duty on Capital goods under Rule 57Q of Central Excise Rules.
- Interpretation of Rule 57R regarding admissibility of credit of duty on Capital goods.
- Impact of the amendment to Rule 57R vide Notification No. 46/97-C.E. (N.T.), dated 1-9-1997 on the admissibility of credit of duty on Capital goods.
- Application of Rule 57T in observing the required procedure by the manufacturer for availing Modvat credit.

Analysis:
The judgment revolves around the issue of the entitlement to credit of duty on Capital goods under Rule 57Q of Central Excise Rules. The Department contended that the assessees were not entitled to such credit as they were manufacturing products on which no excise duty was payable. The crux of the matter lay in the interpretation of Rule 57R regarding the admissibility of credit of duty on Capital goods. The Commissioner (Appeals) held that the provisions of the law grant the benefit on all Capital goods irrespective of the final product being dutiable or not. The Commissioner emphasized that the credit of duty on Capital goods used in the manufacture of products subject to duty was admissible even if other products were exempt from duty.

The judgment delved into the impact of the amendment to Rule 57R vide Notification No. 46/97-C.E. (N.T.), dated 1-9-1997 on the admissibility of credit of duty on Capital goods. The amendment substituted the words "Capital goods which are used in the manufacture of final products" with "Capital goods which are used exclusively in the manufacture of final products." The Tribunal disagreed with the lower authority's interpretation that if exempted products were also manufactured, the credit of duty on Capital goods was not admissible. The Tribunal highlighted that even under the unamended Rule 57R, credit of duty on Capital goods used in the manufacture of dutiable products was admissible.

Furthermore, the judgment discussed the application of Rule 57T, which outlines the procedure to be observed by the manufacturer for availing Modvat credit. The Consultants argued that they had complied with the required procedure, and the declarations filed had been accepted by the Assistant Commissioner. The Tribunal, after careful consideration, upheld the Commissioner (Appeals)'s conclusion that the assessees were entitled to Modvat credit. The Tribunal rejected the Revenue appeals, affirming that the final products were subject to duty, justifying the availment of Modvat credit on Capital goods. The judgment confirmed the orders passed by the Commissioner (Appeals) and dismissed the appeals challenging the entitlement to Modvat credit.

In summary, the judgment clarifies the entitlement to credit of duty on Capital goods under Rule 57Q, interprets the provisions of Rule 57R, discusses the impact of the amendment introduced in 1997, and emphasizes compliance with the procedural requirements outlined in Rule 57T for availing Modvat credit.