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2014 (11) TMI 27 - AT - Central ExciseDenial of MODVAT Credit - Capital goods - Notification No. 14/1996-CE (NT) dated 23/07/96 - Held that - definition of capital goods given in Rule 57Q of the Central Excise Rules, 1944 during the period prior to 16/03/95 was examined once again by Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. vs. CCE, Coimbatore reported in 1999 (4) TMI 153 - CEGAT, NEW DELHI . In this case, the Tribunal, among other items, considered the eligibility for Modvat credit of the wires and cables, control panels, welding electrodes etc. The Tribunal in this judgment relying upon the Apex court s judgment in the cases of J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs. Sales Tax Officer reported in 1964 (10) TMI 2 - SUPREME COURT OF INDIA and Indian Copper Corporation Ltd. - 1965 (61) STC 259 held that the items like wires and cables, control panels, welding electrodes etc. would be covered by the definition of capital goods in Rule 57Q as it stood during the period prior to 16/03/95 - Decided in favour of assessee.
Issues Involved:
1. Eligibility of Modvat credit for certain items classified as capital goods. 2. Retrospective application of Notification No. 11/95-CE (NT) dated 16/03/95. Detailed Analysis: 1. Eligibility of Modvat Credit for Certain Items Classified as Capital Goods: The appellant, a manufacturer of cement, availed Modvat credit on inputs and capital goods used in manufacturing their final products. The dispute period is from 1st November 1994 to 28th February 1995. The original definition of capital goods under Rule 57Q included machines, machinery, plant, equipment, apparatus, tools, or appliances used for producing or processing goods or for bringing about any change in any substance for the manufacture of final products. Components, spare parts, and accessories of these items, as well as moulds, dies, generating sets, and weigh bridges used in the factory, were also included. With effect from 16/03/95, Notification No. 11/1995-CE (NT) added clauses (d) and (e) to this definition, including specific goods and components used in the factory. The appellant took Modvat credit for items like why the at C special, fire crete, air compressors, spare parts for compressors, air cylinders, spare impeller, grate bar, great plate, Fork lifter truck, and lifting chain during the dispute period. A show cause notice was issued for recovery of allegedly wrongly taken Modvat credit of Rs. 41,82,161/-. The original Adjudicating Authority confirmed the demand along with interest and imposed a penalty. The Commissioner (Appeals) partly allowed the appeal but upheld the demand for items used for cutting, repairing, installation, and maintenance of the plant and machinery, as well as items brought within the purview of capital goods by the amended definition. The appellant argued that these items were covered by the definition of capital goods even before the amendment, citing the Larger Bench judgment in CCE, Indore vs. Surya Roshini Ltd. 2. Retrospective Application of Notification No. 11/95-CE (NT) dated 16/03/95: The Tribunal initially dismissed the appeal, holding that the amendment by Notification No. 11/95-CE (NT) was not retrospective. The appellant filed an ROM application, arguing that the Tribunal did not consider the Larger Bench judgment in CCE, Indore vs. Surya Roshini Ltd., which supported their case. The ROM application was allowed, and the appeal was restored. Upon rehearing, the appellant contested only the items newly covered by the amended definition. They argued that the amendment should be applied retrospectively based on the Larger Bench judgment. The respondent countered that the judgment did not support retrospective application, and the goods must meet the original definition criteria for eligibility prior to 16/03/95. The Tribunal considered the submissions and referred to the Larger Bench judgment in Jawahar Mills Ltd. vs. CCE, Coimbatore, which held that items like wires, cables, control panels, and welding electrodes were covered by the definition of capital goods even before the amendment. This judgment was affirmed by the Apex Court, which held that such items qualify as capital goods under Rule 57Q. The Tribunal concluded that the disputed items, used as refractory in kiln shell lining, components of the cement mill, parts of forklift trucks, and lift parts, were eligible for Modvat credit. They had a direct or indirect nexus with the manufacture of the final product, as per the Apex Court's judgment in Jawahar Mills Ltd. Consequently, the impugned order denying Modvat credit for these items was set aside. The appeal was disposed of, allowing Modvat credit for the disputed items while not addressing other items where the denial of credit was not challenged.
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