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of <h1>Appeal granted for Modvat credit on Air-Conditioner in Capsule Manufacturing</h1> The Judge allowed the appeal, recognizing the direct relationship between the Air-conditioner and the manufacturing/processing of Capsules, granting M/s. ... Modvat on capital goods Issues:Eligibility of Air-Conditioner for Modvat credit in Capsule Manufacturing Section.Analysis:The appeal pertained to M/s. Pharmasynth Formulations Ltd. regarding the eligibility of the Air-Conditioner installed in the Capsule Manufacturing Section for Modvat credit. The Commissioner of Central Excise (Appeals), New Delhi, relying on a previous Tribunal decision, held that the air-conditioners were not eligible for Modvat credit.The appellants, engaged in manufacturing Patent and Proprietary Medicines, had availed Modvat credit on the Air-conditioner installed in the Capsule Section. The Air-conditioner's use was in compliance with the 'Goods Manufacturing Practice' prescribed under the Drugs and Cosmetics Rules, 1945. The room's air-conditioning was recommended under Schedule-M for filling Gelatine Capsules, crucial for maintaining product quality.Although the Asstt. Collector acknowledged the essential use of Air-Conditioning Equipment in the Capsule Section under Drugs Laws, the credit was disallowed as it did not fit within the definition of capital goods. The appellants argued that the Air-conditioner's use was specific to the Drugs Act requirements, directly related to the manufacturing process, quality control, and compliance with Drugs Act standards.The Tribunal's decision in the case of CCE, Jaipur v. Sunil Synchem Ltd. was cited, where it was held that parts of the Air-conditioning plant were essential for manufacturing Gelatine capsules of pharmaceutical grade, making Modvat credit admissible for such essential parts.After considering all relevant facts and precedents, the Judge disagreed with the Commissioner of Central Excise (Appeals) and allowed the appeal, recognizing the direct relationship between the Air-conditioner and the manufacturing/processing of Capsules. The judgment favored M/s. Pharmasynth Formulations Ltd., granting them the benefit of Modvat credit for the Air-Conditioner in their Capsule Manufacturing Section.
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