1991 (2) TMI 257 - AT - Central Excise

Tribunal Upholds Collector's Decision on MODVAT Credit Eligibility

The Tribunal upheld the decision of the Collector of Central Excise (Appeals) allowing MODVAT Credit for anti-rust oil but denying it for electroplating ... MODVAT Credit Issues:1. Eligibility of MODVAT Credit for anti-rust oil and electroplating chemicals.2. Interpretation of Rule 57A regarding exclusion of certain items from MODVAT Credit eligibility.Analysis:1. The appeal challenged the decision of the Collector of Central Excise (Appeals), Madras, regarding the eligibility of MODVAT Credit for anti-rust oil and electroplating chemicals. The Collector (Appeals) allowed the credit for anti-rust oil but denied it for chemicals used in electroplating. The appellant argued that the chemicals should be considered capital goods as they are used in the manufacture of final products. The respondent contended that the chemicals are consumable and do not qualify for MODVAT credit under Rule 57A. The Tribunal noted that the chemicals were used in the electroplating process and were consumed in the electrolyzing bath. The appellant's plea to treat the chemicals as tools or apparatus under Rule 57A was rejected, and it was held that MODVAT credit cannot be denied unless the items are specifically included in the excluded category.2. Rule 57A excludes certain items like machines, plant, equipment, apparatus, tools, or appliances used in the manufacturing process from MODVAT Credit eligibility. The Tribunal emphasized that the terms in Rule 57A must be given their natural meaning, and no artificial interpretation should be applied. It was observed that the MODVAT Scheme is beneficial legislation, and unless the items fall within the excluded category, credit cannot be denied. Referring to previous judgments, the Tribunal concluded that items like aluminium sheets and graphite anodes used in manufacturing processes were eligible for MODVAT Credit. The Tribunal held that the lower authority's decision to allow MODVAT Credit for anti-rust oil and electroplating chemicals was legally maintainable, and the appeal by the Revenue was rejected.