2001 (1) TMI 112 - AT - Central Excise

Modvat credit on capital goods u/r 57Q: 1995-96 expanded eligibility held not retrospective; prior rulings reconciled.

The dominant issue was whether 1995-1996 notifications enlarging the scope of Rule 57Q (Modvat on capital goods) operated retrospectively and whether ... Modvat on capital goods - Effect and ambit of notifications issued in 1995 and 1996 enlarging the ambit of Rule 57Q - Retrospective effect - conflict between the decisions of Larger Benches of three Members in Union Carbide India Ltd. v. Collector of Central Excise, Calcutta [1996 (6) TMI 308 - CEGAT, NEW DELHI-LB] and Jawahar Mills Ltd.[1999 (4) TMI 153 - CEGAT, NEW DELHI] - HELD THAT:- In the instant case, no word the meaning of which is doubtful is used in clause (a). In the latter part of clause (a) the particular use to which the capital goods are to be put or utilised is specified. They are (i) used for producing the final product; (ii) used in the process of any goods for the manufacture of final product or (iii) used for bringing about any change in any substance for the manufacture of the final product. No doubt or confusion arises in understanding the above mentioned three situations. Therefore, the principle of noscitur a sociis has no relevance to the facts on hand. Effect and ambit of notifications issued in 1995 and 1996 enlarging the ambit of Rule 57Q cannot have any retrospective effect The goods brought within the purview of this Rule by the notification are eligible for Modvat credit even if they do not satisfy any of the three tests mentioned in the second part of clause (a) of the Explanation. Such goods, even if they are not satisfying the test, will become eligible for Modvat credit by the specific inclusion by the notification with effect from the date of the notification. Thus, we do not find any conflict in the decisions of this Tribunal in the cases of Union Carbide India Ltd. v. Collector of Central Excise, Calcutta and Jawahar Mills Ltd. v. Commissioner of Central Excise, Coimbatore. Notification No. 217/86-C.E., dated 2-4-1986 is in relation to inputs. Availability of Modvat credit in respect of inputs is covered by the decision of this Tribunal in Union Carbide India Ltd. case. Those goods which are claimed as inputs cannot get Modvat credit as capital goods. The questions referred to the Larger Bench are answered as above. Thus, we direct the office to post individual appeals before the concerned Benches for disposal. Issues involved: Conflict between decisions of Larger Benches in Union Carbide India Ltd. v. Collector of Central Excise, Calcutta and Jawahar Mills Ltd. v. Collector of Central Excise, Coimbatore regarding the scope and ambit of Notification 217/86-C.E.Summary:1. The Larger Bench of five Members was constituted to resolve the conflict between the decisions in the above-mentioned cases.2. Rule 57Q introduced by Notification No. 4/94-C.E. allowed manufacturers to claim Modvat credit on capital goods used in their factory, with a specific definition provided for 'capital goods.'3. The definition of 'capital goods' under Rule 57Q includes machines, machinery, plant, equipment, apparatus, tools, appliances, components, spare parts, accessories, moulds, dies, generating sets, and weigh bridges used in the manufacturing process.4. The eligibility for Modvat credit on capital goods is based on whether the goods meet the specified criteria outlined in Rule 57Q.5. The argument that machinery and appliances under Section XVI of the Central Excise Tariff Act should be the basis for deciding capital goods under Rule 57Q was rejected, emphasizing that the definition in Rule 57Q should prevail.6. Notification No. 11/95-C.E. expanded the scope of Rule 57Q by including additional items under clauses (d) and (e) for Modvat credit eligibility.7. The decision in Union Carbide India Ltd. case focused on the definition of 'inputs' under Rule 57A, not on the capital goods covered by Rule 57Q.8. In Jawahar Mills Ltd. case, the Tribunal clarified the eligibility of Modvat credit on capital goods under Rule 57Q, emphasizing the conditions that must be met.9. The interpretation that wires and cables could be considered 'plant' for Modvat credit eligibility was discussed, with a focus on the components, spare parts, or accessories aspect.10. The argument invoking the principle of 'noscitur a sociis' for interpreting the conditions of Modvat credit eligibility on capital goods was deemed irrelevant in this context.11. Notifications issued in 1995 and 1996 expanding Rule 57Q's scope do not have retrospective effect, and goods covered by these notifications are eligible for Modvat credit from the date of notification.12. No conflict was found between the decisions in Union Carbide India Ltd. and Jawahar Mills Ltd. cases, with a distinction made between inputs and capital goods for Modvat credit.13. The questions referred to the Larger Bench were answered, directing individual appeals to be posted before the respective Benches for disposal.