2001 (8) TMI 525 - AT - Central Excise

Summary

Issues:
1. Availability of Modvat credit under Rule 57Q to M/s. G.T.M. Synthetics Ltd.
2. Classification of items like Lubricant Oil, Greases, PVC Cables, Servo Regulators, Overload Relay, Circuit Breaker, and parts of motors as capital goods for Modvat credit eligibility.

Issue 1: Availability of Modvat credit under Rule 57Q
In this appeal, the main issue is whether Modvat credit under Rule 57Q is available to M/s. G.T.M. Synthetics Ltd. for various items mentioned in the Impugned Order. The appellant argues that Lubricant Oil, Greases, and electrical goods like PVC Cables, Servo Regulators, Overload Relay, Circuit Breaker, and parts of motors are not capital goods as they are not directly used in producing or processing final products. On the other hand, the respondents contend that these items are essential for the functioning of machinery and are eligible for Modvat credit under Rule 57Q, citing precedents like Sipta Coated Steel Ltd. and Jawahar Mills Ltd.

Issue 2: Classification of items as capital goods
The Larger Benches of the Tribunal have previously discussed the definition of 'capital goods.' In the case of Jawahar Mills and CCE Indore v. Surya Roshni, it was established that for goods to qualify as capital goods, they must be used for producing the final product, processing goods for the final product, or bringing about a change in any substance for manufacturing the final product. Additionally, components, spare parts, and accessories of machines are also considered capital goods eligible for Modvat credit. The Commissioner (Appeals) detailed the use of various items like PVC Cables, parts of motors, Servo Regulator, Overload Relay, Circuit Breaker, and Lubricant & Grease, indicating their relevance in the manufacturing process.

Judgment:
Based on the analysis of the submissions and precedents, the Tribunal concluded that all items, except Lubricants and Greases, qualify as capital goods eligible for Modvat credit under Rule 57Q. The items like PVC Cables, parts of motors, Servo Regulator, Overload Relay, and Circuit Breaker were deemed essential for production processes and hence eligible for credit. Lubricants and Greases, while not directly involved in production, were considered eligible for Modvat credit under Rule 57A as they are used in or in relation to the manufacture of finished products. Consequently, the appeal filed by the Revenue was rejected, affirming the availability of Modvat credit for the majority of the items in question.