2019 (2) TMI 1027 - AT - Central Excise

Supreme Court overturns Commissioner's decision on CENVAT Credit for railway items, emphasizes manufacturing process importance.

The Supreme Court allowed the appeal regarding the admissibility of CENVAT Credit on rails, locomotives, and railway material, overturning the ... CENVAT Credit - rails, locomotives, railway material etc. - denial of credit on account of nexus - period from April, 2007 to Feb, 2008 - Held that:- The similar issue has been decided by the Hon’ble Supreme Court in the case of Jayaswal Neco [2015 (4) TMI 569 - SUPREME COURT] wherein while considering the admissibility of the railway material used for handling raw material and process goods the Apex Court has held The uses of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron, and allowed the credit. Credit allowed - appeal allowed - decided in favor of appellant. Issues:Admissibility of CENVAT Credit on rails, locomotives, and railway material.Analysis:The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise, Ranchi, denying CENVAT Credit of Rs. 3.99 crores availed on various items during a specific period. The appellant argued that the issue of admissibility of CENVAT Credit on rails and railway material had been settled by the Supreme Court in a previous case. The appellant cited various decisions, including one involving their own unit, to support their claim. The department, however, reiterated the findings in the impugned order.Upon reviewing the records and submissions, it was observed that the dispute centered around the admissibility of CENVAT Credit on railway-related items during a specific period. The Commissioner had held that these items were not used in or in relation to the manufacture of final products, as transportation of raw materials and finished goods was considered distinct from the manufacturing process.The appellant argued that the items in question were indeed used within the factory for transporting various materials essential for the manufacturing process. The department's own admission in a letter supported this claim. Referring to a Supreme Court judgment, it was highlighted that the use of railway tracks within the plant for handling raw materials and processed goods was integral to the manufacturing process.The Supreme Court's decision emphasized that the incidental use of railway tracks for other purposes did not negate their primary role in the manufacturing process. It was noted that the Commissioner's conclusion regarding the use of railway tracks was erroneous and inconsistent with established legal principles. The Tribunal had failed to consider this crucial aspect in its previous order.In light of the Supreme Court judgment and previous Tribunal decisions, which supported the admissibility of credit for similar items, the impugned order was set aside, and the appeal was allowed with consequential relief, if any. The judgment was pronounced on 11.01.2019.