Cenvat credit on integral factory railway tracks allowed, and interest demand set aside for issues not raised on appeal.
Cenvat credit was admissible on railway track material installed inside the plant because it formed an inseparable and integral part of the manufacturing process; the tracks were used to transport hot metal, move hot pigs, and handle raw materials, so incidental other use did not defeat credit. The interest demand on late reversal of credit was also unsustainable because it was sustained on a point not raised in the departmental appeal before the Commissioner (Appeals), leaving the assessee without occasion to contest it at that stage. The impugned order was therefore modified in favour of the assessee.
Issues: (i) Whether Cenvat credit was admissible on railway track material used inside the plant for handling raw materials and process goods; (ii) Whether the demand of interest on late reversal of credit could be sustained when that issue was not raised in the departmental appeal before the Commissioner (Appeals).
Issue (i): Whether Cenvat credit was admissible on railway track material used inside the plant for handling raw materials and process goods.
Analysis: The credit claim was examined in the light of the settled test that goods used in a process or activity so integrally connected with manufacture that production would be commercially inexpedient without them fall within the scope of goods used in manufacture. The railway tracks were found to be installed within the plant for transporting hot metal, moving hot pigs, and handling raw materials through the manufacturing chain. Their use was held to be inseparable and integral to the manufacturing process, and incidental use for other purposes did not take away that character.
Conclusion: The assessee was entitled to Cenvat credit on the railway track materials, and the disallowance was set aside.
Issue (ii): Whether the demand of interest on late reversal of credit could be sustained when that issue was not raised in the departmental appeal before the Commissioner (Appeals).
Analysis: The interest demand was found to have been sustained on a point that had not been put in issue by the departmental appeal before the Commissioner (Appeals). Since the assessee had no occasion to contest that issue at the appellate stage and the original order on interest had not been challenged by the Revenue, the finding sustaining interest was treated as beyond the proper scope of the appeal proceedings.
Conclusion: The demand of interest on late reversal of credit was not sustainable and was set aside.
Final Conclusion: The appeal succeeded on the railway track credit issue and on the interest demand, resulting in a modification of the impugned order in favour of the assessee.
Ratio Decidendi: Goods or materials used within the factory as an inseparable and integral part of the manufacturing process qualify for credit where their absence would make production commercially inexpedient, and an appellate authority cannot sustain a demand on an issue not brought into challenge before it.
TaxTMI 
AI Drafter ✕
TaxTMI 
