2002 (1) TMI 1036 - AT - Central Excise

Tribunal affirms Modvat credit for essential spare parts as capital goods under Rule 57Q

The Tribunal upheld the lower appellate authority's decision allowing Modvat credit for various spare parts and accessories considered as capital goods ... Modvat/Cenvat - Modvat on capital goods Issues:- Modvat credit eligibility for spare parts and accessories considered as capital goods under Rule 57Q.Analysis:The case involved an appeal by the Revenue against an order allowing Modvat credit to the respondent for various spare parts and accessories considered as capital goods under Rule 57Q. The lower appellate authority had allowed credits totaling Rs. 4,12,915/- for 12 items, including Static Convertor, Spare Parts of Jaw Crusher, Spare Impeller, Rent/Leaf Spring, Electric Fan, Electric Motor, ACC MON LC 80, Centre Disc, Filter Bag and Timer Valve, Motor, Hammer and Tooth Ring, and Def. Plates for the period April to September, 1994.The appellant contended that the goods in question did not qualify as capital goods for Modvat credit. However, the respondent argued that all the items fell within the definition of capital goods under Clause (b) of Explanation (1) to Rule 57Q(1) of the Central Excise Rules, 1944. The respondent highlighted the use of each item as noted by the Commissioner (Appeals) to support their claim.The Tribunal considered the Supreme Court's decision in CCE v. Jawahar Mills Ltd., emphasizing that the eligibility of goods for Modvat credit under Rule 57Q should be determined based on their use in the manufacturing process. The Tribunal reviewed the use of each item as noted by the lower appellate authority and found that they qualified for Modvat credit. For instance, the Static Convertor was deemed a component of the rotary kiln, making it eligible as a capital good. Similarly, other items like Spare Parts of Jaw Crusher, Spare for Impeller, Leaf Spring, Electric Fan, Electric Motor, ACC MON LC80, Centre Disc, Filter Bag and Timer Valve, Motor, Hammer and Tooth Ring, and Def. Plates were all found to be essential components or accessories of machinery used in the manufacturing process.The Tribunal referred to previous decisions supporting the eligibility of similar items as capital goods under Rule 57Q. Ultimately, since the use of the goods was not contested and they were deemed essential for the manufacturing process, the Tribunal upheld the lower appellate authority's order allowing Modvat credit for the 12 items. Consequently, the appeals by the Revenue were rejected, affirming the eligibility of the items as capital goods for Modvat credit under Rule 57Q.