2002 (12) TMI 113 - AT - Central Excise

Tribunal allows credit on capital goods for mixed production: Rule 57R interpretation clarified

The Tribunal ruled in favor of the appellants, allowing them to avail credit on capital goods used for manufacturing both dutiable and exempt products. ... Modvat/Cenvat Issues:1. Availment of credit on capital goods used for manufacturing both dutiable and exempt products under Rule 57R of the Central Excise Rules, 1944.Analysis:The case involved the appellants manufacturing HDPE Strips/Tapes, Labels, and Badges while availing modvat credit of duty paid on inputs under specific rules. The dispute centered around the availment of credit on capital goods, specifically label weaving looms/machines and accessories, used for manufacturing labels and badges chargeable to nil rate of duty under the Central Excise Tariff Act, 1985. The department contended that credit cannot be availed as the capital goods were used 'exclusively' for products with no excise duty payable. The appellants argued that the machines were also used for producing laces subject to appropriate duty, thus not exclusively for duty-free products.Upon hearing both sides and acknowledging that some lace production occurred on the capital goods in question, the Tribunal agreed with the appellants. They referenced a previous case involving injection molding machines and plastic crates to support their decision. The Tribunal held that Rule 57R does not apply when capital goods are not used exclusively for duty-free products. Citing another case involving a Bagasse baling press, the Tribunal emphasized that the bar under Rule 57R is only applicable if capital goods are exclusively used for exempt products.Given that the same capital goods were used for producing both dutiable laces and exempt labels and badges, the Tribunal ruled that Rule 57R did not disqualify the appellants. They relied on the precedent set by the earlier decision and set aside the impugned orders, ultimately allowing the appeal. Additionally, a member of the Tribunal highlighted the amendment to Rule 57R, clarifying that the word 'exclusively' made it clear that disqualification only applies when a machine produces goods entirely exempt from duty.In conclusion, the Tribunal's judgment favored the appellants, emphasizing that Rule 57R does not bar credit on capital goods used for manufacturing both dutiable and exempt products. The decision was based on the interpretation of exclusivity in the context of duty-free products and supported by relevant precedents and legal amendments.