2003 (9) TMI 620 - AT - Central Excise

Interpretation of Rule 57Q: Credit for Capital Goods in Sand Muller Production

The judgment focused on the interpretation of Rule 57Q regarding credit on duty paid for capital goods, specifically in the context of sand mix muller ... Cenvat/Modvat - Capital goods Issues involved:1. Interpretation of Rule 57Q regarding credit on duty paid for capital goods.2. Application of Rule 57R(2) in relation to exempted or nil rated intermediate products.3. Consideration of sand mix muller as capital goods for the manufacture of sand moulds.4. Comparison with the decision in Ramkrishna Steel Industries case regarding duty paid on chemicals.5. Determination of cold box core as capital goods for the manufacture of metal castings.Analysis:1. The judgment revolves around the interpretation of Rule 57Q concerning the eligibility of credit on duty paid for capital goods. The Commissioner (Appeals) allowed the credit under Rule 57Q for duty paid on sand mix muller used in preparing sand moulds. However, the Assistant Commissioner denied the credit, stating that since sand moulds were exempt from duty, the capital goods would not be considered used in or in relation to the manufacture of finished excisable goods.2. The application of Rule 57R(2) was crucial in this case. The rule provides an exception that credit cannot be denied due to exempted or nil rated intermediate products arising during the manufacturing process. The Commissioner (Appeals) relied on this rule, but the judgment pointed out that the sand mix muller is solely used for making sand moulds, and it is unclear if an intermediate product arises during this process.3. The judgment emphasized that the sand mix muller is integral to the production of sand moulds, which are considered the final product in this context. It was argued that the machine's usage should be directly linked to the manufacture of castings to qualify for credit under Rule 57Q, rather than considering any potential intermediate products.4. A reference was made to the decision in the Ramkrishna Steel Industries case, where duty paid on chemicals used in making sand for moulds was considered creditable. The judgment highlighted the distinction between Rule 57A and Rule 57Q, emphasizing that the former pertains to the manufacture of final products, unlike the latter which deals with intermediate products.5. Lastly, the judgment briefly touched upon the issue of whether cold box core, used in making sand cores for metal castings, could be classified as capital goods. The reasoning applied to the sand mix muller was deemed relevant in this scenario as well, indicating a consistent approach in determining the eligibility of credit for such machinery.In conclusion, the appeals were allowed, setting aside the orders of the Commissioner (Appeals) and restoring those of the adjudicating authority, with a specific mention of the penalty imposed on R.H. Foundry and Engineers being overturned.