2016 (11) TMI 1435 - HC - Central Excise

MODVAT/CENVAT credit - inputs - Whether Chemical viz. Caustic Soda and Bleaching Powder, used for treatment of water which in turn is used for generation of steam in the powerhouse for generation of electricity could be considered to be used in or in relation to the manufacture of Cement, and therefore, eligible for input Modvat credit in terms of Rule 57A of the Central Excise Rules, 1944? - Held that - similar issue decided in the case of Commissioner of Central Excise Raipur Versus Ms Century Cements 2012 (11) TMI 961 - CHATTISGARH HIGH COURT , where it was held that Goods for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be capital goods , and, therefore, qualify for availing MODVAT credit - the respondent-Company is entitled to Modvat credit for the chemical inputs such as Caustic Soda and Bleaching Powder - appeal dismissed - decided against Revenue.

Summary

Issues:
Whether chemicals used for treatment of water for the generation of electricity can be considered for input Modvat credit in the manufacture of cement.

Analysis:
The case involved a reference application to determine if chemicals like Caustic Soda and Bleaching Powder, used for water treatment in electricity generation for cement manufacturing, are eligible for Modvat credit. The respondent, a cement manufacturing company, claimed the credit, which was denied by the Revenue on the basis that the items were machinery and not inputs. However, an appeal by the respondent was successful, allowing them to claim Modvat credit on the mentioned chemicals.

The legal question at hand was found to be similar to a previous judgment by a Division Bench of the same Court. Referring to the judgment dated 6-8-2012, it was established that goods used for producing, processing, or changing substances for manufacturing final products qualify as "capital goods" eligible for Modvat credit. The Court applied the "user test" laid down by the Supreme Court in a previous case, emphasizing that the chemicals in question were essential for cement manufacturing, making the Tribunal's decision just and legal.

Based on the precedent and legal principles established in previous judgments, the Court concluded that the respondent was indeed entitled to Modvat credit for the chemical inputs like Caustic Soda and Bleaching Powder. Therefore, the reference was answered in favor of the respondent, allowing them to claim the Modvat credit for the mentioned chemicals in the manufacture of cement.