2006 (10) TMI 310 - AT - Central Excise

Cenvat/Modvat - Capital goods - duty paid on the machines/ equipments of a sugar plant - HELD THAT - We find that the facts of the present case are similar to those present in the case of Gujarat Ambuja Cements Ltd. 2000 (8) TMI 178 - CEGAT, NEW DELHI . In this case also parts and components were bought/manufactured by the contractor and the invoices were issued in the name of the manufacturer of the final goods in whose premises the said parts and components were finally assembled and machinery installed. While in the case of Gujarat Ambuja Cements, the credit has been extended mainly on account of the fact that Rule 57T(7) did provide for availment of credit in case parts and machinery got erected through a job worker, the Tribunal did make an observation that the credit can be allowed under the provisions of Rule 57Q itself without taking resort to provision of Rule 57T(7). However, in the case of NRC Ltd. 2001 (6) TMI 114 - CEGAT, MUMBAI , the Tribunal did not refer to the provision of Rule 57T(7) and allowed the credit on the basis of Rule 57Q under which the parts and components of capital goods are also entitled to Modvat credit as inputs for the manufacture of goods to be produced out of such machinery for the installation of which such parts have been used. It has been further observed by the Tribunal that it is immaterial whether the payment for the components/accessories has been made by the contractor or the manufacturer of finished goods as it is the factory of the manufacturer of finished goods in whose premises components/parts of machinery is installed which in turn is used for the manufacture of finished dutiable goods. Similar definition of inputs for the purpose of capital goods exists in Rule 2(b) read with Explanation II of the Cenvat Credit Rules, 2002. We accordingly follow the same and hold that the appellants shall be entitled to the credit of duty paid on such components and parts which are used in the manufacture of sugar plant installed in their premises. The order of the Commissioner is accordingly set aside and the appeal is allowed.

Summary

Issues:
1. Denial of Cenvat credit on machines and equipments used in the manufacture of sugar plant.
2. Applicability of previous tribunal decisions on similar cases.
3. Interpretation of Cenvat Credit Rules, 2001/02.
4. Comparison with previous judgments like Gujarat Ambuja Cements Ltd. and CCE v. NRC Ltd.
5. Eligibility of credit for components and accessories assembled by the contractor.
6. Dispute over entitlement to credit between the manufacturer and the contractor.
7. Analysis of relevant provisions under Rule 57Q and Rule 57T(7) of Central Excise Rules.

Analysis:
The case involved the denial of Cenvat credit to the appellants for duty paid on machines and equipments used in the sugar plant's manufacture. The Commissioner disallowed the credit, imposing penalties and interest. The appellant argued that similar tribunal decisions supported their claim, citing Gujarat Ambuja Cements Ltd. and others. The Commissioner's refusal to follow these precedents was challenged based on the absence of a specific provision in the Cenvat Credit Rules, 2001/02, similar to Rule 57T(7) under the Modvat Credit Rules. The appellant contended that the absence of such a provision did not preclude availing credit on capital goods used in setting up a plant.

Regarding the comparison with CCE v. NRC Ltd., the appellant argued that the facts were similar, involving separate agreements for machinery supply and erection, making the decision applicable. The appellant emphasized recent tribunal decisions upholding credit eligibility for components assembled by contractors under the new Cenvat Credit Rules, 2001/02. The respondent contended that since the components were used by SS Engineers in sugar plant manufacture, they were entitled to the credit, not the appellants.

The Tribunal found the case akin to Gujarat Ambuja Cements Ltd., where credit was allowed under Rule 57Q without reliance on Rule 57T(7). Similarly, in CCE v. NRC Ltd., credit was granted under Rule 57Q for parts and components of capital goods used in manufacturing. The Tribunal held that the appellants were entitled to credit for duty paid on components used in setting up the sugar plant. This decision aligned with previous judgments and the definition of inputs under the Cenvat Credit Rules, 2002. The Commissioner's order was set aside, and the appeal was allowed, affirming the appellants' entitlement to the credit.

In conclusion, the Tribunal's decision clarified the interpretation of relevant provisions and upheld the appellants' right to Cenvat credit for machinery and equipments used in the sugar plant's manufacture, in line with established precedents and the spirit of the Cenvat Credit Scheme.