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TMI Blog2015 (5) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing paper and paper boards. For the period January, 2001 to March, 2001; May, 2001 to June, 2001 and July, 2001 to December, 2001, it claimed MODVAT credit on use of 'Welding Electrodes'. Assistant commissioner, Moradabad issued show cause notice dated 3rd January, 2002 stating that MODVAT credit availed by appellant during aforesaid period was not correct as it was not entitled for such credit on "Welding Electrodes" 4. Appellant submitted reply, stating that "Welding Electrodes" are used in re-building of worn out parts of machines such as hammer, cane crusher, cane unloader etc. and also for connecting pipe lines for conveying steam, liquid juice to the machines installed in the factory for manufacture of sugar and molasses. "Welding Electrodes" are thus used in relation to manufacture of finished products and satisfy the definition of 'capital goods' or 'input' to 'capital goods' entitled for MODVAT credit. 5. Assistant Commissioner, rejected exemplar and disallowed MODVAT credit vide order dated 31st December, 2004, raising a demand of Rs. 183672/-, besides imposing penalty of the same amount. It held that "Welding Electrodes" can neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 986 and Clause (xvib) was inserted by Section 96 of Act 11 of 1987 w.e.f. 12th May, 1987. These clauses read as under : "(xvia) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods; (xvib) provide for the giving of credit of sums of money with respect to raw materials used in the manufacture of excisable goods;" 13. The scheme was introduced by inserting Chapter AA containing Rules 57A to 57J. Initially MODVAT scheme was introduced with a view to avail credit on duty paid on excisable goods used as 'input' in manufacture of final products. From 1st March, 1987, similar scheme for allowing credit of money in respect of certain raw materials used in manufacture of certain excisable goods was introduced and Chapter AAA having Rules 57K to 57P was inserted. Scheme was further enlarged by inserting Chapter AAAA with Rules 57Q to 57U w.e.f. 01.03.1994 so as to permit availment of credit on duty paid on 'capital goods' which are used in manufacturing process. 14. All these three Chapters i.e. AA, AAA and AAAA were substituted by notification no. 6/97/C.E.(N.T.), dated 01.03.1997. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared inputs are used directly by a manufacturer of final products, the credit of the declared duty shall, notwithstanding the actual amount of duty paid on such declared inputs, be deemed to be equivalent to the amount specified in the said notification and the credit of the declared duty shall be allowed to such manufacturer. [(6) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the Official Gazette, declare the inputs on which the duty of excise paid under section 3A of the Central Excise Act, 1944 (1 of 1944), shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification, and allow the credit of such duty in respect of the said inputs at such rate or such amount and subject to such conditions as may be specified in the said notification : Provided that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid under section 3A of the Central Excise Act, 1944 (1 of 1944).] RULE 57B. Eligibility of credit of duty on ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985 (5 of 1986) and used in the factory of the manufacturer Description of final products 1 2 3 1 All goods falling under heading Nos. 82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :-(i) all goods falling under Chapter 24; and, (ii) all goods falling under heading Nos. 36.05 or 37.06.[(iii) ingots and billets of non-alloy steel falling under sub heading Nos. 7206.90 and 7207.90, manufactured in an induction furnace unit, whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under Section 3A of the Central Excise Act, 1944 (1 of 1944).] 2 All goods falling under Chapter 84 (other than internal combustion engines falling under heading No. 84.07 or 84.08 and of a kind used in motor vehicles, compressors falling under heading No. 84.14 and of a kind used in refrigerating and airconditioning appliances and machinery, heading or sub-heading Nos. 84.15, 85.18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of duty which is equal to the additional duty leviable on like goods under section 3 of the Customs Tariff Act, 1975 (51 of 1975), equivalent to the duty of excise paid on such capital goods. (5) The credit of the specified duty on capital goods (other than those capital goods in respect of which credit of duty was allowable under any other rule or notification prior to the 1st day of March, 1997) shall not be allowed if such capital goods were received in the factory before the 1st day of March, 1997. (6) A manufacturer shall be allowed credit of specified duty paid on capital goods manufactured by him for the manufacture of final products in his factory. (7) The credit of the specified duty on capital goods [other than those capital goods covered under S. Nos. 5, 7, 10, 11 and 12 of column (2) of the Table below sub-rule (1)] and received in the factory on or after the 1st day of January, 1996, shall not be taken on a date prior to the date on which such capital goods are installed or, as the case may be, used for manufacturer or a person designated by him for this purpose. (8)Notwithstanding anything contained in sub-rule (7), a manufacturer intending to remove the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Welding Electrodes', as such, may fall. Our attention was drawn to Rule 57B(1)(iv), where MODVAT credit has been allowed to 'inputs' used for manufacture of final products or for any other purpose within the factory of production. Similarly, our attention was also drawn to Rule 57B(1)(vi) which allowed MODVAT credit on accessories on final products cleared alongwith such final products, value of which is included in the assessable value of final products. Learned counsel for appellant could not explain as to how 'Welding Electrodes' can be said to be used for manufacture of final products or accessories of final products, so as to bring within aforesaid provisions. 20. Looking to aforesaid provisions as applicable at the relevant time which is in dispute in the present appeal, we are clearly of the view that 'Welding Electrodes' would not come within the category 'inputs' so as to qualify for MODVAT credit under Rule 57A read with Rule 57B of Rules, 1944. 21. Similarly, whether it can be treated to be 'capital goods' during the relevant period under Rule 57Q, we find that this aspect as already been considered in Central Excise App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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