2010 (8) TMI 288 - HC - Central Excise

Cenvat credit capital goods - rubber strip, electric bulb and electrical machinery - rubber strip falls under Chapter 85 - Chapter 85 and the components, spares and accessories of such goods falls within the definition of capital goods cenvat credit is available spares and accessories of goods order not suffering from any legal infirmity

Summary

Issues:
1. Eligibility of electric bulbs and rubber strips as capital goods under CENVAT Credit Rules, 2001.
2. Demand and recovery of irregular CENVAT credit under Rule 12 of CENVAT Credit Rules, 2001.
3. Imposition of penalty under Rule 13 of CENVAT Credit Rules, 2001.

Issue 1:
The appeal challenged the Tribunal's order allowing the assessee to claim CENVAT credit on electric bulbs and rubber strips. The Revenue contended that these items were not eligible capital goods under Rule 2(b)(i) or spares/components/accessories under Rule 2(b)(ii) of the CENVAT Credit Rules, 2001. The assessee argued that the items were essential for proper lighting and safety in their cement plant, falling under Chapter 85. The Commissioner of Central Excise (Appeals) upheld the assessee's contention, stating that the items were crucial for production and thus eligible for CENVAT credit. The Tribunal, citing a previous judgment, affirmed the eligibility of electric bulbs and rubber strips under Chapter 85. The High Court analyzed the relevant chapters and definitions, concluding that the items fell under Chapter 85 and were indeed capital goods. The Court emphasized the importance of electric equipment in manufacturing processes, aligning with the Supreme Court's precedent on the necessity of electrical equipment for production.

Issue 2:
The Revenue sought to recover irregularly availed CENVAT credit of Rs. 34,527 from the assessee under Rule 12 of the CENVAT Credit Rules, 2001. The adjudicating authority confirmed the demand and imposed a penalty of Rs. 5,000. However, the appellate authorities overturned this decision, stating that the electric bulbs and rubber strips were eligible capital goods. The High Court reiterated that the items were integral to the manufacturing process and thus qualified for CENVAT credit. The Court highlighted the definition of 'capital goods' under the Rules, emphasizing the inclusion of components, spares, and accessories of goods falling under Chapter 85.

Issue 3:
Regarding the penalty under Rule 13 of the CENVAT Credit Rules, 2001, the High Court referenced a Tribunal judgment that rejected a claim for lighting fittings as capital goods. However, the Court distinguished this case by citing a Supreme Court ruling emphasizing the necessity of electrical equipment for manufacturing processes. The Court critiqued the Tribunal's failure to consider the specific chapters and definitions relevant to the case. Ultimately, the High Court upheld the appellate authorities' decision, ruling in favor of the assessee and rejecting the Revenue's appeal. The Court deemed the orders legally sound and valid, requiring no interference.

The High Court dismissed the appeal, with each party bearing its own costs.