CENVAT Credit Allowed for Drums/Barrels as Capital Goods in Manufacturing

The appeals of M/s Tien Yuan (India) Pvt Ltd and the Director of the assessee regarding the availment of CENVAT credit on drums/barrels for transporting input material, specifically menthe oil, were allowed. The drums/barrels were considered capital goods eligible for credit under the CENVAT Credit Rules, 2004, as they functioned as mobile storage tanks for raw materials in manufacturing activities. The decision emphasized the broad interpretation of 'in or in relation to manufacture' and upheld the eligibility of such items for credit. The judgment was pronounced on 29/01/2018.

---

---

Issues: Availment of CENVAT credit on drums/barrels procured for transportation of input material.

Analysis:
The issue in the appeals of M/s Tien Yuan (India) Pvt Ltd and the Director of the assessee revolves around the availment of CENVAT credit on drums/barrels procured by them for the transportation of their input material, specifically menthe oil. The Revenue's contention is that these drums/barrels are not packing material as defined in the CENVAT Credit Rules, 2004, as they are used for products manufactured by an entity other than the assessee. The appellant allegedly sent the drums/barrels to their supplier instead of bringing them into their factory, which led to concerns regarding the misuse of documentation and the invocation of the extended period for scrutiny.

The appellant's counsel relied on the decision in Banco Products (India) Ltd. v. Commissioner of Central Excise, Vadodara, which broadened the interpretation of 'in or in relation to manufacture' as defined by the Supreme Court in previous cases, thereby supporting the eligibility of items like plastic crates for credit. The CENVAT Credit Rules, 2004, clearly state that inputs used in any manufacturing activity are eligible for credit, and the definition of 'capital goods' is broad enough to include storage tanks. The drums/barrels in question, serving as mobile storage tanks for transporting raw materials, are deemed capital goods as they are repeatedly utilized until they are scrapped, reinforcing their categorization as such. The lower authority's orders did not raise any concerns about the quantum of credit availed, focusing solely on the eligibility for credit. Given the limited nature of the allegation against the appellant, the denial of eligibility under the CENVAT Credit Rules, 2004, was deemed unsustainable.

In conclusion, both appeals were allowed, and the judgment was pronounced on 29/01/2018.

---