2011 (1) TMI 422 - AT - Central Excise

Tribunal affirms goods for cold room in honey production as 'capital goods' under EOU exemption.

The Tribunal upheld the decision of the CCE (Appeals) in favor of the respondent, ruling that the goods essential for maintaining the cold room for honey ... Exemption - 100% EOU - The definition of the term “inputs” and “capital goods” as given in the Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004 is relevant only for the purpose of Cenvat credit and there is no justification to apply the same to an exemption notification meant for 100% EOUs - Since there is no definition of term “capital goods” in the exemption Notification No. 22/03-C.E., the term has to be interpreted in the sense in which it is understood in common parlance and on this basis, the pre-fabricated structures, PUFF panels and RPF panels required by the respondent for cold room would have to be treated as items of capital goods - The revenue appeal is dismissed - Decided in favour of assessee. Issues:Interpretation of the term 'capital goods' in an exemption notification for 100% EOUs.Analysis:The case involved a 100% EOU engaged in Apiculture, producing honey for export, seeking to acquire certain goods free of Central Excise Duty for their cold room. The Deputy Commissioner initially disallowed the request, stating the items were not covered under the definition of 'capital goods' in the Cenvat Credit Rules, 2002. The respondent appealed, and the CCE (Appeals) allowed the appeal, emphasizing the necessity of the goods for maintaining specific environmental conditions in the cold room for honey production. The Department then appealed against this decision.During the hearing, the Departmental Representative argued that the goods in question were not capital goods as per the Cenvat Credit Rules, 2002, and hence not eligible for exemption. On the other hand, the respondent's Counsel highlighted the essential role of the goods in maintaining the cold room necessary for honey production for export.The Tribunal carefully considered both sides' submissions and reviewed the records. It noted that the goods were crucial for the cold room, which was essential for honey production. The Department's argument that the Cenvat Credit Rules' definition of 'capital goods' should apply was deemed incorrect. The Tribunal clarified that the Cenvat Credit Rules' definition was relevant only for Cenvat credit purposes and not for exemption notifications for EOUs. Since the exemption notification lacked a specific definition of 'capital goods,' the term had to be interpreted in common parlance. In line with this interpretation, the goods in question were considered capital goods, following a precedent set in a previous Tribunal case.Ultimately, the Tribunal upheld the CCE (Appeals) decision, dismissing the revenue's appeal and affirming that there was no flaw in the impugned order. The judgment highlighted the importance of interpreting terms in exemption notifications based on common understanding rather than Cenvat Credit Rules' definitions.This comprehensive analysis clarifies the issues surrounding the interpretation of 'capital goods' in the context of exemption notifications for 100% EOUs and provides a detailed account of the Tribunal's decision in this case.