KOTHARI SUGARS AND CHEMICALS LTD. Vs. CCE

JUDGEMENT

(1.) THE lower authorities denied Modvat credit to the appellants under Rule 57Q of the Central Excise Rules, 1944 for the period September, 1997 to February, 1998 in respect of the capital goods mentioned in the annexure to the show -cause notice. Hence this appeal. Heard both sides. Ld. Counsel for the appellants submits that the above goods were components of "high pressure boiler" which was used for generating steam which in turn was used for the manufacture of sugar as final product as well as for generating electricity. The boiler which was classifiable under Heading No. 84.02 of the CETA Schedule was an eligible capital goods in terms of S. No. 2 of the Table annexured to Rule 57Q during the material period and consequently all components thereof were also eligible for Modvat credit during the said period in terms of S. No. 5 of the said Table. This being the position, whether the boiler was used for the generation of steam and whether a part of the steam was used for generating electricity and, further, whether a part of such electricity was not captively consumed for the manufacture of final product in the factory were all immaterial, according to ld. Counsel. In this connection, reliance is placed on the Tribunal's decision in CCE, Raipur v. H.E.G. Ltd., [2004 (60) RLT 121 (CESTAT -Del)] wherein certain parts of a captive power plant were held eligible for Modvat/Cenvat credit. Ld. Counsel also relies on the Tribunal's decision in CCE, Raipur v. Jindal Steel and Power Ltd., [ : 2003 (158) ELT 178 :, 2004 (113) ECR 99 (T)], in which case also capital goods used in a captive power plant were held eligible for Modvat credit under Rule 57Q. Ld. Counsel has argued that what was material at the relevant time was whether the capital goods were used in the manufacture of final products. This requirement of Rule 57Q was fulfilled by the assessee and hence it was not open to the Department to deny Modvat Credit to them in respect of the capital goods on any other ground. Ld. DR reiterates the findings recorded in the impugned order.

(2.) AFTER considering the submissions, I find that the Revenue has no case that any of the subject goods was not eligible for capital goods credit by reason of its classifiability under any tariff entry excluded from the purview of Rule 57Q. It has been claimed by ld. Counsel that the "high pressure boiler" was classifiable under Heading No. 84.02 of the CETA schedule. This claim has not been contested. During the material period (Sept., 1997 to Feb., 1998), admissibility of credit on capital goods depended on the classifiability of such goods under specified headings/sub -headings of the Tariff Schedule. Machines falling under Heading 84.02 were covered by S. No. 2 of the Table annexed to Rule 57Q for the purpose of Modvat credit. S. No. 5 of the said Table covered components, spares and accessories of capital goods falling under S. Nos. 1 -4 of the table. Admittedly, all the goods mentioned in the annexure to the show -cause notice were used as components of a "high pressure boiler". Hence these goods were eligible for capital goods credit in terms of S. No. 5 of the said Table. The show -cause notice proposed to deny Modvat credit to the assessee in respect of these goods solely on the ground that these goods were used for generating steam which was, in turn, used for generating electricity, a part of which was not captively consumed for the manufacture of final product in the factory. This ground is not sustainable in view of the case law cited by the ld. Counsel. In the result, the impugned order is set aside and this appeal is allowed.