2007 (12) TMI 70 - AT - Central Excise

Tribunal allows capital goods credit for resin bonded insulation

The tribunal ruled in favor of the appellant, M/s. Dattatreya Textiles Pvt. Ltd., allowing capital goods credit for the resin bonded insulation material ... Capital goods resin bonded insulation material received for use in the humidification plant of the factory for bonding its roof – credit denied on the ground that goods didn’t fall u/r 2 (CCR), nor it was a spare part, component or accessory of the specified items - impugned item is an accessory to the humidification plant, as it is used to enhance its efficiency – as per rule 2 accessories to CG are also eligible for CG credit - Humidification plant is an item of specified CG so credit allowed Issues: Denial of capital goods credit under Cenvat Credit Rules 2002 for resin bonded insulation material used in the humidification plant.Analysis:The case involved the denial of capital goods credit to M/s. Dattatreya Textiles Pvt. Ltd. for availing resin bonded insulation material for their humidification plant. The lower authorities rejected the credit, stating that the goods did not fall under specified chapters or headings in Rule 2 of Cenvat Credit Rules (CCR) 2002, nor were they spare parts, components, or accessories of specified items.The appellant argued that the resin bonded material was used as insulation in the humidification plant to bond its roof, thereby enhancing efficiency and increasing its life. The appellant contended that the item was an accessory to the humidification plant, a specified item of capital goods. The tribunal agreed with this argument, emphasizing that accessories to capital goods are eligible for capital goods credit as per Rule 2 of CCR, 2002.The tribunal found that the resin bonded material used in the humidification plant was indeed an accessory to enhance efficiency or prolong the life of the plant. Since the humidification plant was a specified capital good, the denial of credit, interest, and penalty imposed on the appellants was deemed unsustainable. Consequently, the impugned order was set aside, and the appeal by M/s. Dattatreya Textiles Pvt. Ltd. was allowed with consequential relief. The requirement of predeposit was waived, and the appeal was taken up for disposal, leading to the dismissal of the stay petition.In conclusion, the tribunal ruled in favor of the appellant, allowing capital goods credit for the resin bonded insulation material used in the humidification plant, highlighting the eligibility of accessories to capital goods for such credit under the Cenvat Credit Rules.