2016 (11) TMI 917 - AT - Central Excise

Appellant Granted Modvat Credit for Testing Instrument Under Rule 57Q

M/s. Johnson & Johnson Ltd Versus Commissioner of Central Excise, Pune

M/s. Johnson & Johnson Ltd Versus Commissioner of Central Excise, Pune - TMI Issues Involved:Whether the appellant is entitled to Modvat credit for a testing instrument under the Capital goods in terms of Rule 57Q of Erstwhile Central Excise Rules, 1944.Detailed Analysis:Issue 1: Entitlement to Modvat CreditThe central issue in this case revolves around the entitlement of the appellant to Modvat credit for a testing instrument under Rule 57Q of the Erstwhile Central Excise Rules, 1944. The Adjudicating authority and the first appellate authority denied the Modvat credit, arguing that the testing instrument was used solely for testing purposes and not for producing, processing, or bringing about any change in substance for the manufacturing of the final product. However, the appellant contended that the testing of raw materials and finished goods is an integral part of the manufacturing process, making the testing instrument essential for the production of the final product.Judicial PrecedentsThe judgment cited various precedents where Modvat credit under Capital goods was allowed for testing equipment and apparatus. For instance, in the case of OBLUM ELECTRICALS INDUSTRIES PVT. LTD., the Tribunal emphasized that material handling and testing equipment are eligible for capital goods credit, irrespective of whether they work through mechanical or electronic processes. Similarly, in the case of VINDHYA TELELINKS LTD., the Tribunal held that testing equipment falls under the definition of capital goods and is entitled to Modvat credit. These precedents highlight the importance of testing processes in the manufacturing of final products, supporting the appellant's claim for Modvat credit.DecisionBased on the analysis of the precedents and the integral role of testing instruments in the manufacturing process, the Tribunal, represented by Mr. Ramesh Nair, Member(Judicial), concluded that the appellant is indeed entitled to Modvat credit under Rule 57Q for the testing instrument in question. The impugned order denying the credit was set aside, and the appeal was allowed in favor of the appellant.In conclusion, the judgment underscores the significance of testing instruments in the manufacturing process and establishes the eligibility of such instruments for Modvat credit under Capital goods rules. The decision provides clarity on the admissibility of Modvat credit for testing equipment, aligning with established legal precedents and the essential role of testing in the production of final goods.