Modvat credit on refractory kiln lining materials upheld under Rule 57Q for cement manufacture.

Refractory material used to line a rotary kiln in cement manufacture was treated as eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944. The disallowance rested on the classification of the goods under Chapter 38, but the Tribunal followed its earlier ruling on identical facts and held that Whytheat and similar refractory materials were covered by the explanation to Rule 57Q(1) as it stood before the relevant amendment. The denial of credit was therefore unsustainable under the erstwhile Central Excise framework.

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Issues: Whether refractory material used for lining a rotary kiln in cement manufacture was eligible for Modvat credit as capital goods under Rule 57Q of the Central Excise Rules, 1944.

Analysis: The disallowance was based on the view that the goods fell under Chapter 38 and therefore could not be treated as capital goods for the relevant period. The Tribunal followed its earlier decision on identical facts, which held that Whytheat and similar refractory materials used for lining rotary kilns were covered by the explanation to Rule 57Q(1) as it stood before the relevant amendment and were eligible for credit under the erstwhile Central Excise Rules, 1944.

Conclusion: The refractory material was eligible for Modvat credit under Rule 57Q and the denial of credit was unsustainable.

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