2007 (5) TMI 105 - AT - Central Excise

Cenvat/Modvat - Department alleged that appellant is not entitle for credit on the Polycarbonate Sheets which were procured by them for the use in the production - Held that department allegation was not correct and allowed credit to the appellant

Summary

Issues:
Denial of Modvat credit on Polycarbonate Sheets used in production.

Analysis:
The appeal challenged the denial of Modvat credit on Polycarbonate Sheets used for carrying processed items within the factory. The appellants argued that the sheets were essential for manufacturing their chocolates and, therefore, eligible for Modvat credit as per a Supreme Court judgment. The revenue disputed the credit, stating that the sheets were not specified as Capital Goods under Rule 57Q and that the appellants failed to produce necessary documentation. The Tribunal accepted the appellants' explanation, noting that the sheets were used for accumulating semi-finished goods. A similar case involving Plastic Crates was cited, where Modvat credit was allowed as the crates played a crucial role in the manufacturing process.

In the Plastic Crates case, the Tribunal emphasized the importance of the crates in carrying intermediate products for further manufacturing activities. The lower appellate authority's decision highlighted the essential role of the crates in the manufacturing process, making them eligible for Modvat credit. The Tribunal referenced previous judgments to support the view that material handling equipment used in production or processing of goods qualifies for credit. The Tribunal differentiated between inputs and capital goods, citing relevant case law to justify the decision in favor of the assessee.

The Tribunal concluded that the appellants' use of Polycarbonate Sheets was similar to the case of Plastic Crates, justifying the allowance of Modvat credit. The impugned order denying the credit was set aside, and the appeal was allowed with any consequential relief. The judgment highlighted the importance of understanding the role of materials in the manufacturing process and applying relevant legal principles to determine eligibility for Modvat credit.