2015 (6) TMI 1077 - AT - Central Excise

Cenvat credit - whether cenvat credit can be taken by the appellant for the capital goods relates to some other plant, which was not operational at the material time and that the Cenvat Credit attributable to the capital goods of such other plant (Ethanol Plant) can be used for removal of sugar and molasses from the factory of the appellant - Held that - the plant facilities, such as sugar molasses and Ethanol are situated within the same factory premises of the appellant and the factory as a whole has been registered under the Central Excise statute. Since the above final products are subjected to levy of central excise duty, the inputs and capital goods used/utilized for manufacture of the final product will be eligible for cenvat credit. Rule 3 of the Cenvat Credit Rules only specifies that the duty paid capital goods received in the factory of manufacture of final product will be eligible for availment of cenvat credit. There is no restriction contained in the said Rule that the capital goods used in the factory under construction situated within the common factory shall not be eligible for cenvat credit. Further, sub-rule (4) of Rule 3 of Cenvat Credit Rules permits the manufacturer to utilize cenvat credit on payment of duty of excise on any final product manufactured by him. On a close reading of Rule 3 and Rule 4 of the said rules, it transpires that no restrictions have been imposed that where the plant in a factory is not operational, the cenvat credit taken on the capital goods installed in the said plant will not be eligible for cenvat credit and the credit so taken shall not be eligible for utilization towards the other excisable goods manufactured and cleared from the said factory. Since no restrictions have been imposed in the cenvat credit rules for not taking the cenvat credit on the capital goods installed in the factory, where final goods have been manufactured by the appellant, the denial of cenvat credit is not justified. - Decided in favour of appellant

Summary

Issues:
Whether cenvat credit can be taken for capital goods related to a non-operational plant within the factory premises.

Analysis:
The appellant, a manufacturer of sugar and molasses, installed an Ethanol plant in its factory premises and took cenvat credit for the capital goods used in the plant. The Central Excise Department disputed the cenvat credit, arguing that machinery used for goods other than the final products (sugar and molasses) was not eligible. An adjudication order denied the cenvat credit, leading to a penalty on the appellant. The appeal against this decision was dismissed, prompting the appellant to approach the Tribunal.

The main issue revolved around whether the appellant could claim cenvat credit for capital goods related to a non-operational plant within the factory premises. The appellant argued that the capital goods met the definition of capital goods and were used in the factory for manufacturing final products, making them eligible for cenvat credit. They cited Rule 3 of the Cenvat Credit Rules, stating that duty paid on capital goods received in the factory of the final product's manufacture was eligible for credit. The appellant contended that since the Ethanol plant was within the factory premises where sugar, molasses, and ethanol were final products, the cenvat credit should be allowed for clearance of these products.

In contrast, the Revenue representative reiterated that the Ethanol plant was non-operational during the disputed period, making the appellant ineligible for cenvat credit on the capital goods installed in the plant. However, the Tribunal noted that the factory housed facilities for manufacturing sugar, molasses, and ethanol, all subject to central excise duty. Rule 3 of the Cenvat Credit Rules did not restrict eligibility based on the operational status of a plant within the common factory. Additionally, Rule 4 outlined conditions for cenvat credit, but no restrictions were imposed on non-operational plants regarding credit utilization for other excisable goods.

Ultimately, the Tribunal found no justification for denying cenvat credit on capital goods installed in a factory where final goods were manufactured. As the rules did not impose restrictions in such scenarios, the impugned order was set aside, and the appeal was allowed in favor of the appellant.