2011 (3) TMI 732 - HC - Central Excise

Cenvat Credit on capital goods - Rule 6(4) of the Cenvat Credit Rules, 2004 -The new capital goods in respect of which Cenvat Credit is claimed from the facts of the case it is clear is not exclusively used in the manufacture of exempted goods - The said machinery is used in the manufacture of exempted goods and only when several stages of the process of manufacture are undertaken in the old machinery and thereafter this new machinery plays its role and in the end, in the integrated manufacturing process the exempted goods i.e. vanaspati emerges as a product - The Appellate Authority as well as the Tribunal were justified in coming to the conclusion to which they have come, it is based on legal evidence and does not suffer from any legal infirmity - Decided in favour of assessee.

Summary

Issues:
1. Challenge to Tribunal's order denying Cenvat Credit on capital goods not exclusively used in manufacturing exempted goods.

Analysis:
The case involved a dispute where the revenue challenged a Tribunal order that allowed Cenvat Credit on capital goods not exclusively used in the production of exempted goods. The assessee, engaged in manufacturing refined vegetable oil and vanaspati, received capital goods used in the production of exempted goods. The revenue argued that since the capital goods were used in a plant producing only exempted goods, no credit should be available. The original authority confirmed the demand and imposed a penalty. The Appellate Authority, however, held that credit cannot be denied if the new plant is connected to the process producing the exempted goods at any stage.

The Tribunal further examined the case and found that the new plant, though connected to the old plant, was part of an integrated process where various stages led to the production of exempted goods. It concluded that the capital goods were not exclusively used for exempted goods production, entitling the assessee to Cenvat Credit. The revenue contended that the Tribunal erred in disregarding the original authority's findings based on a factory visit. However, the Tribunal's decision was supported by legal evidence and deemed justified.

The High Court analyzed the case, emphasizing the exclusive use of capital goods in manufacturing exempted goods. It noted that both old and new machinery were integral to the manufacturing process, with the final product emerging after several stages involving both. As per Rule 6(4) of the Cenvat Credit Rules, no credit is allowed on capital goods exclusively used for exempted goods. Since the new machinery was not exclusively used for exempted goods, the Tribunal's decision was upheld. The Court dismissed the appeal, ruling in favor of the assessee and against the revenue.

In conclusion, the High Court affirmed the Tribunal's decision, emphasizing the integrated nature of the manufacturing process involving both old and new machinery. The case highlighted the importance of exclusive use of capital goods in producing exempted goods, as per the relevant rules. The judgment clarified the application of Cenvat Credit rules in cases where machinery is part of an integrated manufacturing process, ultimately upholding the assessee's entitlement to the credit.