1996 (4) TMI 291 - AT - Central Excise

Commissioner upholds decision in favor of respondents, allowing Modvat credit for machinery and equipment.

The Commissioner (Appeals) upheld the decision in favor of the respondents, dismissing the Department's appeal against the denial of Modvat credit for ... Modvat - Capital Goods Issues:Denial of Modvat credit for chilled water coil and weighing machine as capital goods under Rule 57Q.Analysis:The appeal was filed by the Department against the Order-in-Appeal denying Modvat credit for chilled water coil and weighing machine, stating they are not capital goods. The Asstt. Collector denied the credit, claiming these items are not covered within the definition of capital goods. However, the Commissioner (Appeals) held that the definition of capital goods under Rule 57Q is broad enough to include machinery and equipment used for producing goods. The chilled water coil is used in the air handling unit to regulate temperature, falling under the definition of capital goods. Similarly, the weighing machine, used for weighing raw materials, also qualifies as a capital good under the explanation.During the hearing, the Departmental Representative reiterated the grounds for denying Modvat credit, arguing that the items do not meet the definition of capital goods under Rule 57Q. On the other hand, the respondents cited a decision of the Gujarat High Court regarding the essential nature of machinery in textile industry processes. They argued that since machinery is not defined in the Central Excise Act, the items in question should be treated as machinery based on the court's decision.The judgment carefully considered the matter and referred to the Explanation of Rule 57Q, which defines capital goods to include machines, machinery, equipment, and parts used in the manufacturing process. The Explanation clarifies that not only machinery that brings about changes but also parts and accessories used in the manufacturing process are considered capital goods. Therefore, the Commissioner (Appeals) was correct in interpreting Rule 57Q broadly to cover the chilled water coil and weighing machine. Consequently, the appeal filed by the Department was dismissed, upholding the decision in favor of the respondents.