2004 (7) TMI 212 - AT - Central Excise

Denial of Modvat credit on capital goods overturned by CESTAT

The appeal was filed against the denial of Modvat credit on capital goods due to the emergence of the intermediate product 'sliver' during the ... Remand order - Scope of - Cenvat/Modvat - Capital goods - Marketability Issues:1. Denial of Modvat credit on capital goods due to the emergence of intermediate product 'sliver' during the manufacturing process.2. Marketability of the intermediate product 'sliver' for the purpose of Modvat credit.Analysis:Issue 1: Denial of Modvat credit on capital goods due to the emergence of intermediate product 'sliver'The appeal was filed against the order passed by the Commissioner of Central Excise (Appeals) Salem, which allowed the appeal filed by the department and denied the benefit of Modvat credit on capital goods to the appellants. The original authority had allowed the Modvat credit, but the Commissioner modified the order. The Tribunal had earlier set aside the order for reconsideration of the issue of marketability of cotton carded/combed. The Assistant Commissioner later decided in favor of the assessee, but the Revenue appealed again. The Tribunal referred to previous judgments and held that Modvat credit cannot be denied on capital goods due to the emergence of the intermediate product 'sliver' during the manufacturing process.Issue 2: Marketability of the intermediate product 'sliver' for the purpose of Modvat creditThe Tribunal analyzed the marketability of the intermediate product 'sliver' and referred to various legal precedents. It mentioned a judgment by the Hon'ble High Court of Delhi which held that sliver at an intermediate stage is not marketable and does not attract levy of duty. The Tribunal also cited a case where it was held that carded gilled slivers wholly of wool emerging at an intermediate stage are not considered goods. Additionally, a circular by the Central Board of Excise & Customs clarified that Cenvat credit should not be denied on capital goods used in the manufacture of intermediate products exempt from duty. Based on these precedents, the Tribunal concluded that Modvat credit cannot be denied on capital goods due to the emergence of the intermediate product 'sliver' and set aside the impugned order, allowing the appeal.This detailed analysis of the legal judgment highlights the issues of denial of Modvat credit on capital goods and the marketability of the intermediate product 'sliver' in the context of the appeal before the Appellate Tribunal CESTAT, CHENNAI.