2000 (5) TMI 270 - AT - Central Excise

Interpretation of Capital Goods Definition: Tribunal allows Modvat credit, Revenue challenges decision

The case involved a dispute over whether transformers could be considered capital goods for Modvat credit under Rule 57Q of the Central Excise Rules. The ... Reference to High Court - Modvat on capital goods Issues:1. Interpretation of the definition of capital goods under Rule 57Q of the Central Excise Rules.2. Tribunal's authority to allow Modvat credit on goods not explicitly defined as capital goods.3. Reference of a question of law to the High Court for consideration.Analysis:1. The case involved a dispute regarding the eligibility of transformers as capital goods for Modvat credit under Rule 57Q of the Central Excise Rules. The Tribunal's Final Order allowed the credit based on previous judgments, including one in the case of Collector of Central Excise v. Navbharat Paper Mills. The Revenue challenged this decision, arguing that transformers did not fall under the definition of capital goods as per the rules prior to a specific date.2. The Revenue filed an application under Section 35F(1) seeking reference of a question of law to the High Court. The question raised was whether the Tribunal had the authority to grant Modvat credit on goods that did not strictly meet the definition of capital goods under Rule 57Q. The Tribunal noted similar issues referred to the Bombay High Court and the Supreme Court, indicating a legal question for consideration.3. Despite the respondents citing a previous order rejecting a similar reference application, the Tribunal decided to refer the question of law to the Hon'ble Rajasthan High Court at Jodhpur. The specific question referred related to the classification of electric distribution equipment, such as transformers, cables, fuses, and electric motors, as capital goods under the relevant provisions of Rule 57Q. The Tribunal allowed the reference application, emphasizing the need for clarity on the interpretation of the law in such cases.This detailed analysis outlines the legal complexities surrounding the interpretation of the definition of capital goods, the Tribunal's authority in granting Modvat credit, and the process of referring questions of law to the High Court for consideration in the context of the judgment delivered by the Appellate Tribunal CEGAT, New Delhi.