2010 (8) TMI 525 - AT - Central Excise

Cenvat credit - the plastic crates procured by the appellants were used for handling the material, the terms input has a conventional meaning - As per Circular No. 643/34/02 dated 1-7-2002 it has been clarified that the cost of reusable container like glass bottles, crates etc. is amortized and included in the cost of product itself. The cost of secondary packing cannot be excluded and further clarification has been given that the cost of crates is to be amortized and included in the cost of product while determining the transaction value when the cost of plastic crates forms the part of transaction value the Cenvat credit on these plastic crates cannot be denied - Plastic crates are being used by the appellants as material handling equipment and transportation of their finished goods for safely transportation by their finished goods to their customers which forms the part of secondary packing. Held that the Cenvat credit taken by the appellants is available to them in plastic crates - The impugned order is set aside and appeal is allowed.

Summary

Issues: Denial of Cenvat credit on plastic crates used for material handling.

Analysis:
The appellants filed an appeal against the denial of Cenvat credit on plastic crates used for handling material. The issue revolved around whether plastic crates used as material handling equipment could be considered as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. The lower authorities denied the credit, stating that the plastic crates did not qualify as inputs since they were used for handling material and not wholly or substantially consumed during the manufacturing process.

The appellant's representative argued that previous judgments by the Larger Bench and the Tribunal had allowed modvatable credit on plastic crates used as material handling equipment. Citing cases like Banco Products (India) Ltd. and GKN Sinter Metals Ltd., the representative contended that the plastic crates should be considered as inputs eligible for Cenvat credit. Additionally, reference was made to Circular No. 643/34/02, which clarified that the cost of reusable containers, including plastic crates, should be included in the cost of the product itself.

On the contrary, the Departmental Representative argued that the plastic crates were used for transporting finished goods to customers' premises, which did not qualify them as inputs directly or indirectly used in the manufacturing process. The contention was that the plastic crates were part of the secondary packing and not integral to the manufacturing process.

After hearing both sides, the Tribunal examined Circular No. 643/34/02, which emphasized that the cost of plastic crates should be included in the transaction value of the product. The Tribunal concluded that since the plastic crates were used for material handling and transportation of finished goods, they qualified as inputs under the Cenvat Credit Rules. The Tribunal relied on previous judgments and the circular to allow the Cenvat credit on plastic crates, setting aside the lower authorities' order and allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, holding that the plastic crates used for material handling were eligible for Cenvat credit based on established legal precedents and the clarification provided in Circular No. 643/34/02.