2009 (7) TMI 1118 - AT - Central Excise

Summary

Issues: Denial of credit on capital goods (forged products) and eligibility for Modvat credit.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the appellants appealed against the denial of credit on capital goods, specifically forged products, namely forged steel shafts. The original authority had allowed credit of Rs. 28,860.00 on forged products, but the Revenue filed an appeal before the Commissioner (Appeals) which was allowed, leading to the appellants filing this appeal. The Counsel for the appellants argued that the forged products are components and parts of various machines eligible for Modvat credit, emphasizing that the use of these items in machines was not disputed by the Revenue. The Counsel relied on various decisions of the Tribunal and a decision of the Hon'ble Rajasthan High Court to support their case.

The Joint CDR representing the Revenue reiterated the findings of the Commissioner (Appeals), stating that the forged products were not used in machines directly but after certain processes like grooving and shelling. The Revenue's contention was that since the capital goods were not used as such in the plant and machinery directly, the credit should be denied. It was argued that forged items, being intermediate products for plant and machinery, cannot be considered components or parts of capital goods.

After hearing both sides, the Tribunal noted that the Revenue argued that forged items can be considered capital goods only after undergoing certain processes that make them suitable for use in machinery. These processes are considered ancillary to the manufacturing process of converting raw materials into finished machinery or components. However, the Tribunal observed that the forged products were indeed used in the manufacture of the final product, namely in a sugar factory after processes like grooving and shelling. These processes were deemed incidental for use in the final product and not as intermediate products. The Tribunal referenced a previous decision where credit on forged products was allowed, leading to the conclusion that denial of credit on forged products was unwarranted, and the appeal by the appellants was allowed.

In conclusion, the Tribunal set aside the denial of credit on forged products, ruling in favor of the appellants.