2018 (4) TMI 1227 - AT - Central Excise

Appeal granted for credit on essential manufacturing items for excise duty

The Tribunal allowed the appeal, overturning the denial of credit on pallets, storage racks, conveyor system, steel tubes, angles, and flats for central ... CENVAT credit - capital goods - Pallets, storage racks, conveyor system and certain steel tubes, angles and flats used to make steel cover of welding area for safety - Held that: - the pallets and storage racks are essential items for safekeeping and further use of raw materials, components and semi-finished goods or finished goods before they are either processed or cleared out of factory. These can be considered as essential items involved in the manufacturing process - credit allowed. Conveyor belts - Held that: - conveyor belts are essential in the manufacturing process - it is the use of the product which will determine the eligibility rather than the nature of the product as it enters the factory. It is nobody's case that the conveyor belt is not connected to manufacturing process - credit allowed. Steel tubes, angles and flats - Held that: - the steel tubes, angles and flats on which credit was availed were used to create a steel cover around welding machine for industrial safety. The operation of welding machine is connected to such safety measure - credit allowed. Appeal allowed - decided in favor of appellant. Issues: Eligibility of credit on pallets, storage racks, conveyor system, steel tubes, angles, and flats for central excise duty.Eligibility of Credit on Pallets and Storage Racks:The dispute centered around the denial of credit on pallets, storage racks, and certain steel items used in manufacturing automobile door parts. The appellant argued that these items were crucial for safe storage of raw materials and were integral to the manufacturing process. The Tribunal examined photographs and usage of the items, concluding that pallets and storage racks were essential for safekeeping raw materials and goods before processing or clearance. The decision referenced a previous case involving plastic crates to support the allowance of credit on such items, emphasizing their importance in the manufacturing process.Eligibility of Credit on Conveyor System:Regarding the conveyor system, the appellant contended that it was vital for material handling and movement within the factory. The Tribunal noted that the classification of the conveyor belt by the supplier did not determine its eligibility for credit. Citing a Supreme Court case, the Tribunal highlighted the importance of the use of the product in determining credit eligibility rather than its initial classification. The Tribunal concluded that the conveyor belt was connected to the manufacturing process and should be considered eligible for credit.Eligibility of Credit on Steel Tubes, Angles, and Flats:The appellant justified the credit taken on steel tubes, angles, and flats used to create a steel cover around welding machines for safety purposes. The Tribunal agreed that these items were essential for industrial safety measures and were part of the capital machinery. The Tribunal found no reason to deny credit for such essential fabrication within the factory premises.Conclusion:After thorough analysis and discussion, the Tribunal found the denial of credit on the mentioned items unjustified. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.