1998 (6) TMI 271 - AT - Central Excise

Tribunal clarifies Modvat credit eligibility for refractories, excludes concrete & mortar

The Tribunal held that certain items like refractories could be considered capital goods under Rule 57Q, granting the appellants partial relief by ... Modvat on capital goods Issues:Challenge to duty confirmation by Commissioner (Appeals) regarding Modvat credit on certain declared capital goods under the Modvat scheme.Analysis:The appeal before the Appellate Tribunal CEGAT, New Delhi involved the challenge against the Order of the Commissioner (Appeals), Central Excise, Allahabad confirming a duty of Rs. 9,63,435.00. The appellants, who manufacture glass and glassware, submitted a declaration for taking credit on certain declared capital goods under the Modvat scheme. The Department sought to disallow Modvat credit on specific items of capital goods, alleging that they were construction materials used for upkeep and maintenance of the furnace, not contributing to the change in the final product's manufacture. The first adjudicating authority disallowed credit on five out of six items, but allowed credit on moulds. The Commissioner (Appeals) upheld the lower authority's decision, leading to the appeal.The appellants argued that items like fire bricks, blocks, tiles, and electro cast refractories were integral components of the furnace, crucial for converting raw materials into molten glass, which is then shaped into glassware. They contended that these items should be eligible for Modvat credit as capital goods, emphasizing their direct role in the manufacturing process. The appellants highlighted that refractory items were always capital goods, even though specifically mentioned as such in an amended notification from 16-3-1995. They also referenced tribunal decisions to support their position.The Department defended the impugned order, asserting that certain items only became eligible for Modvat credit as capital goods after the amendment of Rule 57Q on 16-3-1995. They argued that items like cement, mortar, and concrete were construction materials for furnace lining, not contributing to the final product's transformation. The Department cited relevant tribunal decisions to support their stance.After considering the submissions and case law, the Tribunal held that refractories, along with other specified items, could be considered capital goods under Rule 57Q. However, concrete and mortar were deemed construction materials and not eligible for Modvat credit under Rule 57Q. The impugned order was modified to allow certain items to be considered capital goods, granting the appellants partial relief and eligibility for consequential benefits under the law.In conclusion, the Tribunal's decision clarified the eligibility of specific items as capital goods for Modvat credit, emphasizing their role in the manufacturing process while excluding certain construction materials. The judgment provided a nuanced analysis of the issues raised and resolved the dispute regarding the admissibility of Modvat credit on declared capital goods.