Modvat credit on plant-supporting steel structures and electrical items was held admissible, with penalty set aside.

Supporting steel structure used to support the clinker hopper and loading arrangement was treated as part of the plant and held eligible for capital goods credit under Rule 57Q of the Central Excise Rules, 1944. The power pack voltage relay and choke cables were also held eligible as electrical items qualifying for credit on the basis of the applicable Larger Bench decision. As the Modvat credit on the disputed items was admissible, there was no wrongful availment and the penalty was not sustainable.

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Issues: Whether Modvat credit was admissible on the supporting steel structure and electrical items used in the manufacture of clinker and cement, and whether the penalty was sustainable.

Analysis: The supporting steel structure was found to perform the function of supporting the clinker hopper and related loading arrangement and was therefore treated as part of the plant. It was held to be eligible for capital goods credit under Rule 57Q of the Central Excise Rules, 1944. The power pack voltage relay and choke cables were treated as electrical items and, on the basis of the applicable Larger Bench decision, were also held eligible for credit. Since the credit was admissible on the disputed items, there was no wrong availment to sustain the penalty.

Conclusion: The credit was held admissible and the penalty was set aside.

Ratio Decidendi: Items forming part of plant by reason of their function in the manufacturing arrangement, and electrical items qualifying as capital goods, are eligible for Modvat credit under Rule 57Q, and penalty cannot be sustained where credit is correctly availed.

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