2006 (12) TMI 410 - AT - Central Excise

Summary

Issues involved:
The issues involved in the judgment are the disallowance of Cenvat credit for certain goods used in project work, the definition of "capital goods" under the CENVAT Credit Rules, and the interpretation of whether certain goods qualify as essential parts of machinery.

Disallowance of Cenvat credit:
The appellant challenged the order disallowing Cenvat credit of Rs. 4,42,296/- for goods used in project work, which were treated as capital goods. The Commissioner (Appeals) relied on a previous Tribunal decision regarding the use of items in construction and machinery support structures.

Definition of "capital goods" under CENVAT Credit Rules:
The dispute arose from the appellant wrongly taking and utilizing credit of central excise duty on certain goods, claiming them as capital goods under Rule 2 of the CENVAT Credit Rules, 2002. The Revenue initiated proceedings for recovery of the wrongly availed Cenvat credit.

Interpretation of essential parts of machinery:
The adjudicating authority concluded that the goods in question were not essential parts of the machinery, namely furnace and electric crane, as they were fabricated to support the machinery and were embedded in the earth. The Appellate Commissioner set aside the recovery and penalty imposed by the adjudicating authority.

The judgment highlighted the wide meaning of the term "plant" in the context of "capital goods" under CENVAT rules. The omission of "plant" from the definition of capital goods in the relevant rules led to a shift in legislative intent. The Commissioner (Appeals) erred in relying on previous decisions that included plant and its components as capital goods, as they were excluded under the current rules.

In conclusion, the impugned order disallowing Cenvat credit was set aside, and the original order was restored. The appeal was allowed based on the interpretation of the definition of "capital goods" under the CENVAT Credit Rules.