2014 (9) TMI 106 - AT - Central Excise

Court affirms cenvat credit eligibility for iron and steel used in manufacturing process

COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY Versus ACE GLASS CONTAINERS LTD

The judgment upheld the decision of the Commissioner (Appeals) to allow cenvat credit on iron and steel articles used in the manufacture of a chimney. The ... Denial of CENVAT Credit - cenvat credit on MS plates, MS angles, channels, rounds, screws etc. used in the manufacture of chimney - Held that:- Commissioner (Appeals) allowed credit following the decision of the Supreme Court in the case of Rajasthan Spinning and Weaving Mills (2010 (7) TMI 12 - SUPREME COURT OF INDIA) - The Hon'ble Supreme Court held that assessee was entitled to avail modvat credit in respect of steel plates, and MS channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods. In the present case, the respondent used these items for fabrication of furnace. It is seen that Hon'ble High Courts in the case of Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT) and Hindustan Zinc Ltd. (2013 (3) TMI 427 - CESTAT NEW DELHI) held that MS/SS plates used in workshop meant for repair and maintenance of machinery which are used for manufacture of final product and are necessary for running the plant and up-keeping of machinery directly involved in the manufacturing of products, are eligible to avail modvat credit - Decided against Revenue. Issues:- Appeal against the order allowing cenvat credit on iron and steel articles used in the manufacture of a chimney.- Interpretation of whether the items used in the fabrication of a chimney qualify for cenvat credit.- Application of relevant legal precedents in determining eligibility for cenvat credit.Analysis:The Revenue filed an appeal challenging the decision of the Commissioner (Appeals) allowing cenvat credit on iron and steel articles used in the manufacture of a chimney. The Revenue contended that the items were used in the repair of the chimney, and since the respondents did not declare that they manufactured chimneys, they were not eligible for the credit. The Revenue relied on a Supreme Court decision in a similar case. On the other hand, the advocate for the respondent argued that the items were indeed used in the manufacture of the chimney and provided evidence to support this claim. The advocate cited various legal precedents, including decisions from the High Courts and the Tribunal, to support the eligibility of the items for cenvat credit, even if they were used for repairing machinery. The Commissioner (Appeals) had allowed the credit based on the Tribunal's decision in a similar case upheld by the Supreme Court.The Commissioner (Appeals) detailed the importance of the items in the fabrication of the chimney, emphasizing that the chimney was an essential part of the furnace operation. The Commissioner (Appeals) justified the allowance of credit by referring to the Tribunal's decision upheld by the Supreme Court, which considered similar items as capital goods eligible for cenvat credit. The Commissioner (Appeals) rejected the Revenue's argument that the items were used for repair, citing High Court decisions that supported the eligibility of such items for credit when used in manufacturing processes. Based on this analysis, the judge found no reason to interfere with the Commissioner (Appeals) order and rejected the Revenue's appeal.In conclusion, the judgment upheld the decision of the Commissioner (Appeals) to allow cenvat credit on iron and steel articles used in the manufacture of a chimney. The judgment emphasized the importance of considering the purpose for which the items were used and applying relevant legal precedents to determine eligibility for cenvat credit. The judgment highlighted the distinction between items used for repair and those used in manufacturing processes, affirming the eligibility of the items in question for cenvat credit.