ORDER
Moheb Ali M., Member (T)
1. The issue pertains to eligibility to Modvat credit under Rule 57Q of the erstwhile Central Excise Rules on goods falling under chapter subheading 84.24. The year in which the dispute arose is 1998. Capital goods credit taken on the sound blast machine was denied on the ground that the said machine falls under heading 84.24 of the Central Excise Tariff Act and such goods were excluded from the definition of capital goods under Rule 57Q. A penalty was also imposed on the appellant under Rule 173Q as he availed of inadmissible credit. Hence the appeal.
2. Heard both sides.
3. It was argued that the sound blast machine is a part of annealing line. The line encompasses several equipments in the form of dual play off reels, straightener, stitcher, direct oil fired annealing furnace with recuperator, looper car, re-circulating spray quench system, sludge separator, drier, shot blasting unit, rewind reel, coil car for transportation of coils and coil storage. Thus there is no doubt that a sound blasting machine is one of the machines in an annealing line. The appellants admit (though they have been taking different stands before ,the lower authorities) that they received the sound blasting machine parts under two invoices, one dated 30-3-1997 and the other dated 26-6-1997. There is no dispute on the classification of sound blasting machine, it falls under chapter heading 84.24. But as pointed out, the appellants received the parts of the machine and not the machine itself. It is the appellants’ contention that the sound blasting machine is a component part of annealing machine which falls under heading 84.79 of the Central Excise Tariff Act and parts of machines mentioned under Explanation 1 to Rule 57Q as it stood at the material time, were eligible to credit, under sl. No. (d) of the said explanation. This view is supported, according to the appellant, by Board’s clarification in Circular No. 276/1/10/96-TRU, dated 2-12-1996.
4. The said circular clearly says that credit on component parts should not be denied on the ground that the classification of such parts do not correspond to the classification of machines mentioned in such clauses (a), (b) and (c) to explanation annexed to Rule 57Q. In the present case, the facts are different. The main machine, sound blast machine, is excluded from explanation (a) as it falls under chapter heading 84.24 of the Central Excise Tariff Act. What are procured by the appellants are parts of the excluded capital goods. It cannot be argued that even though the main machine is excluded from the definition of capital goods, its parts should be considered as capital goods. Thus, component parts of all machines stated in clauses (a), (b) and (c) irrespective of where the components are classified, are eligible for Modvat credit, but the component parts of excluded machines (84.24) cannot be considered as being eligible for capital goods credit.
5. The credit, therefore, has been rightly denied. The penalty confirmed by the Commissioner (Rs. 50,000/), under Rule 173Q is, however, set aside as deliberate contravention of rules with an intent to evade duty is not found.
6. The appeal is thus partly allowed.