2011 (4) TMI 1196 - AT - Central Excise

Cenvat credit - batteries used in the manufacture of captive power generation and distribution system for GAIL - The respondents contending that the inputs in question were received by them at different sites of the project awarded to them by M/s GAIL and that the project were funded by Asian Development Bank - Held that - Since the system was to be manufactured at various sites, each such site was to be considered as the part of manufacturing premises for that system, the goods received at those sites by the assessee ought to be considered as having been received in the factory premises of the respondents - It was the specific case of the respondents that the goods were subjected to payment of duty, they were duly received by the respondent they were utilized in the final product manufactured by the respondents, and the final product was a dutiable product - Decided against the revenue.

Summary

Issues: Appeal against denial of credit on batteries used in manufacturing captive power generation system.

Issue 1: Denial of credit on batteries used in manufacturing captive power generation system
The appeal arose from an order passed by the Commissioner (Appeals) Ghaziabad, where the department's appeal against the order passed by the adjudicating authority was rejected. The Deputy Commissioner, Ghaziabad had dropped the proceedings initiated against the respondent for denial of credit amounting to Rs.29,34,360/- on batteries used in the manufacture of captive power generation and distribution system for GAIL. The respondents, engaged in the manufacture of electrical/electronics machinery and equipment, availed modvat facility under Central Excise Rules. They utilized the credit on batteries as inputs from July 1997 to November 1997. A show cause notice was issued to the respondents alleging that the inputs were not brought into the factory or used for manufacturing. The respondents argued that the inputs were received at different project sites funded by Asian Development Bank and should be considered as part of their manufacturing premises. Both authorities accepted the respondent's contention, stating that the inputs were duly received, utilized in the final product, and subjected to duty, leading to the dismissal of the appeal.

Analysis:
The judgment highlights the importance of proper utilization and receipt of inputs in claiming credit under the modvat facility. The authorities emphasized that the goods were received, utilized in the final product, and duty was paid on the final product, which were undisputed facts throughout the proceedings. The decision underscores the need for clear documentation and evidence to support the utilization of inputs in manufacturing processes to avail credit. The judgment also emphasizes the significance of project-specific considerations in determining the eligibility of credit, as seen in the case where inputs were received at different project sites funded by an external entity. Overall, the judgment reinforces the principle that credit can be claimed if inputs are received, used in manufacturing, and duty is paid on the final product, even if the manufacturing process occurs at multiple sites considered part of the factory premises.