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of <h1>Tribunal denies Modvat credit for generator in manufacturing bagging machines</h1> The Tribunal upheld the decision to disallow Modvat credit for a generator used in manufacturing bagging machines, determining that the generator was not ... Modvat/Cenvat - Generator Issues:Appeal against disallowance of Modvat credit for a generator in the manufacturing process of bagging machines.Analysis:The appellants contested the disallowance of Modvat credit for a generator used in manufacturing bagging machines. The Dy. Commissioner initially allowed the credit on all items, including the generator. However, the Commissioner (Appeals) reversed this decision specifically for the generator, prompting the appellants to appeal against this ruling.The appellants argued that the generator, being an accessory to the bagging machines they manufactured, should not have the Modvat credit disallowed. They contended that the generator was an essential part of the machines, without which the machines could not function, making it eligible for Modvat credit as an input.The dispute centered on whether the generator could be considered an input for the bagging machines. The Tribunal noted that the bagging machine could operate using electricity alone, with the generator serving as a backup in case of power failure. It was determined that the generator was not an input for the bagging machine, as the machine was complete and functional without it.The Tribunal examined the relevant Rule 57A and its Explanation, which included accessories of the final product as part of the input. However, this provision was added through a notification in 1995, while the Modvat claim in question pertained to 1993. As such, the Tribunal ruled that the new clause could not be applied retrospectively to allow Modvat credit for the generator.Additionally, the Tribunal highlighted a previous case where Modvat credit for an accessory was allowed because its value was included in the final product's value. In contrast, there was no evidence in the current case to suggest the generator's value was factored into the final product's value, further supporting the decision to disallow the credit.Ultimately, the Tribunal upheld the Commissioner (Appeals)'s decision to disallow the Modvat credit for the generator, considering it a standby provision rather than an essential input for the bagging machines. Consequently, the appeal was dismissed for lack of merit.
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