Capital goods credit for molasses storage tanks denied where M.S. plates were used only for by-product storage, not manufacturing processing.

M.S. plates used to fabricate storage tanks for molasses were not eligible for capital goods credit under Rule 57Q because the tanks were used only for storage of a by-product and did not themselves function as goods used in producing or processing final products. The later broader tariff-based amendment and the subsequent inclusion of storage tanks from 1-3-2001 did not apply retrospectively to the disputed periods. The alternative claim for input duty credit also failed because the tanks were not accepted as part of the manufacturing plant on the facts found.

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Issues: Whether M.S. plates used in the fabrication of storage tanks for molasses were eligible for capital goods credit under Rule 57Q of the Central Excise Rules, 1944, and whether the alternative claim for input duty credit could be sustained.

Analysis: For the relevant periods, eligibility under Rule 57Q depended first on whether the goods, or the parts and accessories in question, fell within the specified capital goods categories and the applicable explanation then in force. The storage tanks were used only for storage of molasses, a by-product, and were not goods used for producing or processing any goods or for bringing about a change in any substance for manufacture of final products. The M.S. plates used to fabricate those tanks therefore could not be treated as components, parts or accessories of capital goods covered by the rule during the disputed periods. The later amendment introducing a broader tariff-based concept did not assist the assessee for the periods in dispute, and the inclusion of storage tanks in the eligible list from 1-3-2001 had no retrospective operation. The cited precedents and the Board circular were distinguished because they related to storage tanks used for raw materials, intermediate products or processed material, not for storage of a by-product in the circumstances of this case. The alternative plea based on input credit was also rejected as the factual basis for treating the tanks as part of the manufacturing plant was not accepted.

Conclusion: The M.S. plates used in the fabrication of the storage tanks were not eligible for capital goods credit or the alternative input credit claim.

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