2016 (10) TMI 1193 - AT - Central Excise

CENVAT credit - Removal of capital goods to other unit for use in manufacture - Held that - Mandate of the statute is that capital goods should be installed in a factory or in the premises of the provider of output service for allowance of Cenvat credit on the capital goods. Such essential condition was satisfied - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty demand on capital goods removed to Unit-IV.
2. Requirement of installation of capital goods in the factory.
3. Dispute over Cenvat credit and use of capital goods in Unit-IV.

Analysis:
1. The first issue revolves around the duty demand of &8377; 25,57,945/- on capital goods removed to Unit-IV by the appellant for manufacturing purposes. The appellant argued that after initially taking credit for the capital goods, they reversed the credit upon removal to Unit-IV and invoicing, thus no duty demand should arise. The Tribunal agreed, emphasizing that the use of capital goods in Unit-IV was not disputed, and therefore, the duty levy was unwarranted.

2. The second issue concerns the Revenue's contention that the law mandates the installation of capital goods in the appellant's factory. However, the Tribunal noted that the essential requirement is the use of capital goods for manufacturing purposes, not necessarily their physical installation in a specific location. The Tribunal highlighted that the appellant had complied with this requirement by using the capital goods in Unit-IV, which entitled Unit-IV to take credit, ultimately leading to the allowance of Cenvat credit on the capital goods.

3. The final issue involves the dispute over Cenvat credit and the utilization of capital goods in Unit-IV. The appellant had reversed the Cenvat credit under the Central Excise invoice as per Rule 11, and Unit-IV was utilizing the capital goods for manufacturing without causing any prejudice to revenue. The Tribunal found that the denial of Cenvat credit on the capital goods to the appellant was unjustified, as the statutory mandate of using capital goods for manufacturing purposes was met. Consequently, the Tribunal allowed the appeal, emphasizing the lawful utilization of the capital goods and the entitlement to Cenvat credit.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting the lawful utilization of capital goods in Unit-IV for manufacturing purposes, which entitled the appellant to Cenvat credit and negated the duty demand imposed on the removed capital goods.