2007 (12) TMI 106 - AT - Central Excise

Tribunal grants credit for essential furnace components, denies for non-contributing items

The Tribunal ruled in favor of the appellants, setting aside the denial of credit for items described as M.S. Structures, Cable Trays, and S.I. ... “Furnace Casing of Zinc” made of iron and steel are used as part of furnace, credit allowed – “cable trays” are providing support to cables which provide power for running of machinery for mfg. final product are eligible for credit – “S.I. Poles” & “Nitrogen and other gases” are not used for manufacture of goods, so credit not admissible – “labour charges” on which credit has been availed & duty has been paid on them so they are not input, so not eligible for credit – appeal partly allowed Issues:1. Denial of credit for items described as M.S. Structures, Cable Trays, and S.I. Structures.2. Classification of M.S. Structures under Chapter 73 of the Tariff.3. Eligibility of Cable Trays for credit.4. Denial of credit for S.I. Poles.5. Denial of credit for Nitrogen and other gases.6. Treatment of duty on labour charges as input for credit.Analysis:1. The appellants contested the denial of credit for items described as M.S. Structures, Cable Trays, and S.I. Structures. The Tribunal noted that the items in question were actually Furnace Casing of Zinc holding furnace and radiant tubes, essential components for the functioning of the furnace. The invoices described the items as Furnace Casing and radiant tube, establishing their role as integral parts of the furnace. Consequently, the Tribunal ruled that the denial of credit based on treating the items as M.S. Structures was incorrect and unsustainable, setting aside the decision.2. Regarding the classification of M.S. Structures under Chapter 73 of the Tariff, the revenue argued that these structures do not fall under the definition of capital goods. However, the Tribunal observed that the items were casing and radiant tubes made of iron and steel, explicitly designated for use as part of a furnace. As the items were described as furnace casing in the invoices, the Tribunal concluded that denying input credit by categorizing them as M.S. Structures was unjustified, and the decision was overturned.3. The eligibility of Cable Trays for credit was established by referencing a previous case (Binani Cement Ltd. v. CCE, Jaipur). The Tribunal affirmed that Cable Trays, essential for supporting cables providing power to machinery for manufacturing final products, were indeed eligible for credit. Citing the precedent, the Tribunal set aside the denial of credit on Cable Trays.4. In the case of S.I. Poles, the revenue contended that these poles were not utilized in the manufacturing process but were installed for lighting purposes in the factory. The Tribunal, finding no contradiction to this fact in the appeal, upheld the denial of credit for S.I. Poles as they were not directly contributing to the production of goods.5. Concerning the denial of credit for Nitrogen and other gases, the revenue highlighted the lack of evidence provided by the appellants regarding the usage of these gases in the production of excisable goods. The Tribunal reviewed the absence of such evidence throughout the proceedings and concurred that the denial of credit was justified due to the failure to demonstrate the utilization of gases in the manufacturing process.6. Lastly, the Tribunal addressed the treatment of duty on labour charges as input for credit. The appellants argued that credit was availed based on the quantity of inputs specified by the manufacturer, and subsequently, duty was paid on labour charges. However, the Tribunal clarified that labour charges did not qualify as inputs for credit, affirming the correctness of denying credit in this regard.In conclusion, the Tribunal disposed of the appeal by addressing each issue comprehensively and providing detailed reasoning for the decisions made.