2001 (2) TMI 683 - AT - Central Excise

Issues Involved:
1. Eligibility of Modvat credit for components used in manufacturing boilers, steam turbines, and pollution control equipment.
2. Applicability of Rule 57A and Rule 57Q for capital goods credit.
3. Impact of amendments and notifications on the eligibility of Modvat credit.
4. Use of electricity generated within the factory and its impact on Modvat credit eligibility.
5. Interpretation of excisable goods and their use in the manufacturing process.

Detailed Analysis:

1. Eligibility of Modvat credit for components used in manufacturing boilers, steam turbines, and pollution control equipment:
The central issue revolves around whether Modvat credit of duty paid on components used in manufacturing boilers, steam turbines, and pollution control equipment, which are used for generating steam and electricity, is available to the assessee. The Assistant Commissioner initially disallowed the credit for components received before 16-3-1995, citing that these goods were included in the definition of capital goods under Rule 57Q only from 16-3-1995. The Commissioner (Appeals) upheld this view but allowed credit for pollution control equipment from 16-3-1995. The Tribunal directed the Adjudicating Authority to re-examine whether these components qualify as capital goods as defined in Rule 57Q and whether they are used for producing, processing, or bringing about any change in the final products.

2. Applicability of Rule 57A and Rule 57Q for capital goods credit:
The assessee argued that they are eligible for Modvat credit under Rule 57A for components of boilers, turbines, and pollution control equipment, which are capital goods used within the factory. The Tribunal noted that the availability of Modvat credit under Rule 57A depends on whether the goods are capital goods as defined in Rule 57Q. The Tribunal directed the Adjudicating Authority to reconsider the matter in light of the Larger Bench decision in Jawahar Mills Ltd. v. Commissioner of Central Excise, 1999 (108) E.L.T. 47 (T), which provided a broader interpretation of capital goods.

3. Impact of amendments and notifications on the eligibility of Modvat credit:
The Tribunal highlighted the importance of various amendments and notifications issued in March and May 1995, which impacted the eligibility of Modvat credit. The Adjudicating Authority was instructed to examine when the boilers, turbines, and pollution control equipment were manufactured and whether they were used after the issuance of Notification No. 67/95-C.E., dated 16-3-1995, and the amendment to Rule 57D(2) by Notification No. 17/95 (N.T.), dated 18-5-1995.

4. Use of electricity generated within the factory and its impact on Modvat credit eligibility:
The Tribunal addressed the issue of whether the electricity generated by the co-generation plant, which is partly used within the factory and partly supplied to TNEB, affects the eligibility for Modvat credit. The Tribunal directed the Adjudicating Authority to determine if the electricity is one of the final products exempt from the whole of the duty of excise and whether the use of electricity outside the factory premises disqualifies the assessee from claiming Modvat credit.

5. Interpretation of excisable goods and their use in the manufacturing process:
The Tribunal emphasized that the Adjudicating Authority must examine whether the boilers, turbines, and pollution control equipment manufactured by the assessee are excisable goods. Both Rule 57A and Rule 57Q apply to excisable goods, and if these goods are not excisable, the benefit of input credit or capital goods credit will not be available. The Tribunal also noted that the credit of specified duty should not be denied or varied on the ground that inputs are used in the manufacture of capital goods exempt from duty.

Conclusion:
The Tribunal remanded all matters to the Adjudicating Authority for re-adjudication, considering the submissions made by both sides and the detailed discussions in the order. The Adjudicating Authority was instructed to re-examine the eligibility of Modvat credit for the components used in manufacturing boilers, steam turbines, and pollution control equipment, taking into account the definitions, amendments, and notifications relevant to the case.

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