1999 (7) TMI 443 - AT - Central Excise

Tribunal allows capital goods credit for specific items, penalty overturned

BHILWARA SPINNERS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

The Tribunal ruled in favor of the appellants, allowing capital goods credit for Electric Wires & Cables and Speed Variator but denying it for Limit ... Modvat on capital goods Issues:Admissibility of capital goods credit under Rule 57Q for specific goods.Analysis:The appeal filed by M/s. Bhilwara Spinners Ltd. questioned the admissibility of capital goods credit under Rule 57Q for Electric Wires & Cables, Speed Variator, Limit Switch, and M.C.B. The Assistant Commissioner initially disallowed the credit, stating that the wires & cables were used for power connection and not for manufacturing goods. The Commissioner (Appeals) upheld this decision, citing precedent cases. However, the appellant argued that the wires and cables were essential for supplying power to machinery used in manufacturing final goods, emphasizing that these items are indeed used for production. The appellant also referred to a recent decision by the Larger Bench of the Appellate Tribunal in a different case, which supported their position.The respondent reiterated the earlier decisions and argued that the appellants failed to substantiate their claim regarding the limit switch and MCB. After considering both sides' submissions, the Tribunal referred to the Jawahar Mills case, which clarified the scope of capital goods eligible for credit under Rule 57Q. The Tribunal highlighted that wires and cables, along with control panels and welding electrodes, qualify as capital goods under the rule. Consequently, the Tribunal ruled in favor of the appellants regarding wires, cables, and speed variator, as these items were deemed necessary for business operations. However, the Tribunal denied the capital goods credit for the limit switch and MCB, as the appellants did not provide sufficient evidence that these goods were used in the production or processing of goods. Additionally, the Tribunal set aside the penalty imposed on the appellants based on the circumstances of the case.In conclusion, the appeal was disposed of with the decision that capital goods credit is available for wires, cables, and speed variator, but not for limit switch and MCB due to lack of substantiation. The Tribunal's ruling aligned with the interpretation of the expression 'used for producing goods' under Rule 57Q, emphasizing the necessity and direct relevance of the items in the manufacturing process.