2009 (6) TMI 815 - AT - Central Excise

Summary

Issues:
- Classification of Tungsten Carbide Tools as input or capital goods.
- Eligibility of respondent for Cenvat credit on Tungsten Carbide Tools.

Analysis:
1. Classification of Tungsten Carbide Tools: The case involved the dispute over whether Tungsten Carbide Tools should be classified as input or capital goods for the purpose of availing Cenvat credit. The adjudicating authority disallowed the credit on the tools, considering them as capital goods. However, the Commissioner (Appeals) held that Tungsten Carbide Tools are indeed 'capital goods' and allowed the respondent to claim 50% of the credit as such in one financial year. The Revenue appealed this decision, citing the precedent set by the Larger Bench in the case of Commissioner of Central Excise v. Surya Roshni Ltd., which stated that goods claimed as 'inputs' cannot be treated as 'capital goods' for credit purposes.

2. Legal Interpretation of Precedents: The respondent's counsel argued that the Revenue's reliance on the Surya Roshni Ltd. case was based solely on the headnotes and not the full judgment. They pointed out that the Surya Roshni case clarified the distinction between 'inputs' and 'capital goods' based on the specific definitions at the time. The counsel emphasized that if goods were initially considered 'inputs' and later claimed as 'capital goods,' it was permissible, as established in various judicial decisions like Commissioner of Customs & Central Excise v. Modi Rubber Ltd. The counsel also cited cases such as Modern Steels Limited v. Commissioner of Central Excise and Share Medical Care v. Union of India to support the contention that credit should not be denied based on the initial classification.

3. Final Decision: The Tribunal upheld the Commissioner (Appeals) order, affirming that the respondent was entitled to claim Cenvat credit on Tungsten Carbide Tools as capital goods, despite the initial classification as inputs. The Tribunal found no fault in the Commissioner's decision and dismissed the Revenue's appeal. Additionally, the Cross-Objection filed by the respondent was disposed of accordingly.

In conclusion, the judgment clarified the distinction between 'inputs' and 'capital goods' for availing Cenvat credit, emphasizing that a change in classification from input to capital goods does not preclude the taxpayer from claiming the credit. The decision was based on a thorough analysis of relevant precedents and legal interpretations, ensuring a fair outcome for the respondent in this case.