Modvat Part&accessories Capital Goods

1) We were disallowed Modvat credit on MS Channels and MS Angles which was claimed by us as part and accessories of Electrical Hoist ( S.H. No.8425.00) for installation and operation of the same in factory in relation to the manufacture of excisable goods. It was adjudged in our case vide order no. SCDN(3)40/HWD/97 dated 12th September, 1997 that above MS channels and MS angles cannot be called accessories to the electrical hoist, because angles and channels are not part or assembly of electrical hoist. The angles and channels are merely structural materials used for making certain structure for installation of the electrical hoist. For being classified as accessory the article must be a part or assembly of the main equipment or machine though it may not be essential. 2) Further we were disallowed Modvat credit on H.R. Coil and channels which were claimed by us MS Channels being used for making support structure for holding the ducting pipe line for flue gases from furnace and H.R. Coils being used for support of furnace chimney as the chimney height has to be above 90 feet above ground level as per norms of pollution control. We had claimed modvat credit on them as pollution control equipment. It was adjudged in our case vide order no. SCDN(3)37/HWD/97 dated 11th November, 1997 that there is no dispute that the pollution control equipments are eligible capital goods irrespective of their classification. It was contended that M.S. Channels and H.R. Coils cannot be called pollution control equipments as they are used for providing support to ducting pipe line and chimney. The Supreme Court has dismissed the special leave petition filed by the Commissioner of Central Excise, Meerut on 3-8-2001 against the tribunal’s order, on identical issues, in the case of Simbhaoli Sugar Mills Ltd. Vs. Commissioner of C.Ex., Meerut[ 2001(135) E.L.T. 1239]. The assessee in the above case had claimed modvat credit on joints, channels, angles and MS beams which were used in fabricating support structures for installation of equipments such as vaccum pan, crystallizers, sugar grader, elevator, at required heights. They had claimed Modvat credit on the above items as part and accessories of the plants. The Assisstant Commissioner had disallowed the Modvat credit on the ground that they are components for supporting structure for installation of equipment and not components of the capital goods. The Tribunal decided that if a item is used for raising structure to support the various machines then they will be covered by explanation to the Rule 57Q i.e. they can be treated as parts and accessories of the capital goods. However if the items are such that they are used as building material i.e. if the items are used in the construction of wall or any part of the plant structure as construction material then modvat credit will not be allowable on such items.

In our case since in both of the above cases modvat credit was disallowed on the ground of Channels, Angles etc. being used as support structure for installation of capital goods, so per ratio of the above cited judgement modvat credit will be allowed.