IMPORTANT POINT
The court established that Monitors used in the manufacturing process qualify as capital goods eligible for MODVAT Credit under the Central Excise Act, 1944.

JUDGMENT :

Per Dr. Pushpendra Singh Bhati, J.

1. This Central Excise Appeal under Section 35G of the Central Excise Act, 1944 (hereinafter referred to as ‘Act of 1944’) has been preferred against the judgment and order dated 19.08.2003 passed by the Customs, Excise and Service Tax Appellate Tribunal, (CESTAT), New Delhi, whereby the relief prayed for therein, by the appellant, was declined by the learned CESTAT, while holding that the item in question i.e. capital goods, namely, Monitors of the Computer Control System (CCS) fall under the respective heading, were not eligible for MODVAT Credit under Rule 57Q of the Central Excise Rules, 1944 (hereinafter referred to as ‘Rules of 1944’).

2. As the pleaded facts would reveal, the appellant, which is a Company duly registered under the provisions of the Companies Act, 1956, is engaged in the manufacture of Cement & Cliners, having its manufacturing activities conducted at Nimbahera, District Chittorgarh, Rajasthan.

2.1. It has been averred in the appeal that the item in question, namely, Monitors, as above, are used in the CCR of the Plant, which is fully controlled by the computers and the CCR has regulatory computers installed, for feeding various figures. Furthermore, the Monitor is the screen on which the figures after feeding in the computer can be seen or read, thus, the same being an integral part of the whole system of business. Hence, there is a direct nexus between the plant and the items, including the item in question in the CCR.

2.2. Towards the items i.e. Monitor’s type and A.C.S.R. Conductor, aluminum and spares for engine (Sulger) Z 40/48 the appellant availed MODVAT Credit, for which a show cause notice dated 31.01.2000 was served upon it, by the Deputy Commissioner, Central Excise Department, Chittorgarh, indicating therein that the said MODVAT Credit, which was to the tune of Rs.1,97,941/- was taken by the appellant, despite the fact that the said items do not fall within the definition of Capital Goods, under Rule 57-Q/57-T of the Rules of 1944; thereby such amount was sought to be held as recoverable from the appellant.

2.3. To the aforesaid show cause notice, the appellant submitted a detailed reply on 29.03.2000, but the respondent No.2 (adjudicating authority) being not satisfied with the same, passed an order dated 31.05.2000, whereby though allowed the MODVAT Credit of Rs.63,361/-, but disallowed the amount of MODVAT credit to the tune of Rs.1,34,580/- to the appellant; also imposed a penalty of RS.2,000/- upon the appellant under Rule 173Q(1) (bb) of the Rules of 1944.

2.4. Being aggrieved by the aforesaid order dated 31.05.2000, the appellant preferred an appeal before the Commissioner (Appeals) under Section 35 of the Act of 1944, which was partly allowed vide order dated 16.04.2002 with respect to ACSR Conductor, Aluminum, holding that the Monitor’s type falling under the respective heading are specifically excluded in view of insertion of the heading in the exclusion clause of the table appearing in Rule 57Q of the Rules of 1944.

2.5. Against the order dated 16.04.2002, the appellant preferred an appeal before the learned CESTAT, which was dismissed vide the impugned order dated 19.08.2003.

3. Heard learned counsel for the parties as well as perused the record of the case.

4. While admitting the present appeal and issuance notice thereof, this Hon’ble Court vide order dated 20.01.2010 observed that the following substantial question of law is involved in the present appeal:

“Whether in the facts and circumstances of the case, monitors of Computer Control System installed in Central Control Room (CCR) in the factory of the appellant are not integral part of the manufacturing process and thus not eligible for MODVAT Credit under Central Excise Rules, 1944?”

5. This Court observes that the issue involved in the present appeal pertains to allowability of MODVAT Credit on capital goods, namely, Monitors type.

6. This Court has considered that the Monitors type are a