2011 (4) TMI 1128 - AT - Central Excise

Tribunal allows CENVAT credit for MS slotted racks, recognizing their integral role in manufacturing and storage processes.

The Tribunal ruled in favor of the appellants, allowing CENVAT credit on MS slotted racks used for storing raw materials in factory premises. It found the ... CENVAT credit - denied on MS slotted racks which was being used for storing material, in factory premises – Held that:- MS slotted racks is nothing but a storage system of raw material and as held by this Tribunal in the case of Sonai Engineering [2010 (3) TMI 514 - CESTAT, MUMBAI] that storage system being used for storing raw material by the assessee is an integral part of the activity of manufacturing and is directly or indirectly involved in the process of manufacturing. It is not disputed that these racks are not being used for storage and raw material. Therefore, the appellants are entitled for CENVAT credit on these MS slotted racks as they are being used for storage of raw material which is an integral part of the activity of manufacture and is involved in the process of manufacture, order set aside and appeal is allowed Issues:Appeal against denial of CENVAT credit on MS slotted racks used for storing material in factory premises.Analysis:The case involved an appeal against the denial of CENVAT credit on MS slotted racks used for storing material in the factory premises. The appellants, who are manufacturers availing CENVAT credit, were alleged to have availed credit on racks that were neither inputs nor capital goods as per the CENVAT Credit Rules, 2004. The show-cause notice was issued, and demands were confirmed by lower authorities. The advocate for the appellants argued that the racks were integral to the manufacturing process, citing precedents like Banco Products (India) Ltd. v. CCE and CCE v. Sonai Engineering P. Ltd. The advocate for the respondent contended that the racks did not qualify as inputs or capital goods. The main issue was whether the appellants were entitled to CENVAT credit on the MS slotted racks used for storing raw material.Upon examination of both sides' submissions, it was determined that the key issue was whether the appellants could avail CENVAT credit on the MS slotted racks used for storing raw material. The respondent argued that the racks did not qualify as inputs or accessories of capital goods under the CENVAT Credit Rules, 2004. The advocate referred to legal precedents to support the contention. However, the Tribunal found that the racks were an integral part of the manufacturing activity, as storage of raw material was directly involved in the manufacturing process. The Tribunal relied on the decision in Banco Products (India) Ltd. and the case of Sonai Engineering to support the allowance of CENVAT credit on the racks. It was concluded that the appellants were entitled to the credit as the racks were used for storing raw material, an essential part of the manufacturing process. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential relief.In conclusion, the judgment resolved the issue of entitlement to CENVAT credit on MS slotted racks used for storing raw material in the factory premises. The Tribunal ruled in favor of the appellants, considering the racks as integral to the manufacturing process based on legal precedents and the direct involvement of storage in the manufacturing activity. The decision highlighted the importance of storage systems in the manufacturing process and clarified the eligibility for CENVAT credit in such cases.