2012 (11) TMI 435 - AT - Central Excise

Denial of cenvat credit manufacture of batteries - Hydraulic Oil and Hadilin as capital goods Held that - Hydraulic Oil is indispensable for operating any Hydraulic Machine used as component for all Machinery falling under eligible Chapter. It is essential for operating a Hydraulic Machine , which is in turn, an essential component of a Machinery with which it is functioning - goods are indispensable and undisputedly, they are used in the manufactory for the manufacture of final goods - Appellant is eligible for CENVAT Credit

Summary

Issues:
- Appeal against denial of CENVAT Credit for Hydraulic Oil and Hadilin as capital goods or inputs.

Analysis:
The Appellant, engaged in battery manufacturing under Chapter 85.07 of Central Excise Tariff Act, filed an Appeal against the denial of CENVAT Credit by both lower Authorities for claiming Hydraulic Oil and Hadilin as capital goods. The Appellant argued that these goods are essential for the functioning of Hydraulic and Hadi Die Casting Machines, submitting a certificate and relying on legal precedents. The Appellant contended that as per the Hon'ble Supreme Court's decision and Board's Circular, goods like Hydraulic Oil and Hadilin qualify as capital goods eligible for CENVAT Credit. Additionally, an alternate plea was made for considering the goods as inputs.

The Department's stance was that the goods did not fall under the definition of 'Capital Goods.' However, upon review, the Tribunal found that the goods were indeed used in the factory for manufacturing final products and were not excluded as they were not utilized in office premises. The Tribunal acknowledged the indispensable nature of Hydraulic Oil for operating Hydraulic Machines, comparing it to 'blood' in the human body, and recognized the crucial role of Hadilin in the Hadi Die Casting Machine for product quality and machine functionality. Consequently, the Tribunal concluded that the goods were indispensable and used in the manufacturing process, making the Appellant eligible for CENVAT Credit. The Commissioner (Appeals) Order was set aside, and the Appeal was allowed.

In conclusion, the Tribunal's decision favored the Appellant, allowing the CENVAT Credit for Hydraulic Oil and Hadilin based on their essential role in the manufacturing process, in line with legal precedents and the nature of the goods as critical components for machinery functionality and product quality.