1998 (4) TMI 259 - AT - Central Excise

Tribunal affirms classification of dryer as capital goods under Rule 57Q, allowing Modvat credit

The Tribunal rejected the Department's appeal regarding the classification of a dryer with prefilter and postfilter in a photoreceptor room as capital ... Modvat on capital goods Issues:Whether dryer with prefilter and postfilter erected in photoreceptor room is capital goods under Rule 57Q of the Central Excise Rules.Analysis:The appeal involved a dispute regarding the classification of a dryer with prefilter and postfilter erected in a photoreceptor room as capital goods under Rule 57Q of the Central Excise Rules. The Department argued that the issue should be kept in abeyance pending a decision by the Larger Bench, citing a previous case. However, the Respondents contended that the issue had already been settled by the Tribunal in their own case. They highlighted the importance of a Thermohygrograph in the manufacturing process, which was considered an integral part of the plant. The Tribunal distinguished a previous judgment and held that the Thermohygrograph, necessary for maintaining temperature and humidity, qualified as capital goods, entitling the Respondents to Modvat credit. Consequently, the Department's appeal was rejected.The Respondents further argued that the dryer with prefilter was part of the Air handling units and thus eligible for capital goods credit. They referenced previous decisions supporting their claim, including one involving fan coils. The Department, however, insisted that the matter should be decided by the Larger Bench, citing precedents where capital goods credit was denied for items like Air Conditioners. The Tribunal considered the arguments from both sides and noted previous decisions in favor of the Respondents, where capital goods credit had been allowed for items such as distribution panel/control panel and fan coils. Emphasizing the importance of the dryer with filter in the manufacturing process, crucial for completing the coating process, the Tribunal upheld the Commissioner (Appeals) orders and dismissed the Department's appeal.In conclusion, the judgment addressed the classification of equipment in a manufacturing setting as capital goods under Rule 57Q of the Central Excise Rules. It emphasized the significance of specific machinery, like the Thermohygrograph and the dryer with prefilter, in the manufacturing process, leading to the decision to allow capital goods credit for these items. The Tribunal's analysis considered the essential role played by these components in maintaining the required conditions for manufacturing processes, ultimately impacting the final product.