2013 (7) TMI 3 - AT - Central Excise

CENVAT credit on wooden articles denied - demand and recovery of CENVAT Credit - Held that - There is no dispute that these wooden propellers are used by the appellant for making sand moulds from which he manufactures the casting propellers. It is also undisputed that the Excise duty has been paid on such wooden propellers by the manufacturer. It is seen that the appellant has taken the CENVAT Credit of the duty paid under the capital goods. As the definition of the input in CENVAT Credit Rules, 2004 clearly indicate at Explanation (ii) that input includes the goods used in the manufacture of capital goods which are further used in the factory of the manufacturer, the item, even if it is not the capital goods, it can be considered as an input as there is no dispute about its use in the factory premises of the appellant for manufacturing of propellers by casting. See Meghmani Dyes & Intermediates Ltd (2009 (7) TMI 868 - CESTAT, AHMEDABAD). In favour of assessee.

Summary

Issues involved:
1. Availment of CENVAT credit on wooden articles as capital goods.
2. Interpretation of CENVAT Credit Rules regarding input goods.
3. Dispute over the classification of wooden propellers under Chapter 44 of Central Excise Act.

Analysis:
1. The appellant availed CENVAT credit on wooden articles (patterns) under Chapter 44219030, considering them as capital goods. However, it was observed during an audit that this availed credit was not in accordance with the definition of capital goods under CENVAT Credit Rules, leading to a show cause notice for recovery of Rs.76,100 under Central Excise Act, 1944.

2. The main contention revolved around whether the wooden propellers, used by the appellant for making sand moulds and further manufacturing propellers through casting, could be considered as input goods eligible for CENVAT credit. The appellant argued that the propellers were essential in their manufacturing process, citing a previous case decision for support.

3. The dispute further delved into the classification of wooden propellers under Chapter 44 of the Central Excise Act, 1944. The Department contended that these items did not qualify as capital goods for availing credit. However, the Tribunal noted that the propellers were indeed used in the factory premises for manufacturing propellers through casting, and the duty on them had been duly paid by the manufacturer.

4. Upon careful consideration, the Tribunal found that the wooden propellers, although not strictly falling under the definition of capital goods, could be considered as input goods as they were used in the factory for manufacturing the final product. The Tribunal emphasized the inclusive nature of the definition of input under CENVAT Credit Rules, 2004, allowing for a broader interpretation to facilitate credit eligibility.

5. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing them to avail CENVAT credit on the duty paid for the wooden propellers used in the manufacturing process. The decision was based on the understanding that the propellers, despite not meeting the capital goods criteria, qualified as input goods under the relevant rules.

6. The judgment highlighted the misinterpretation of the law by the lower authorities and relied on a previous case decision to support the appellant's eligibility for CENVAT credit on the wooden propellers. The ruling provided clarity on the classification and eligibility of input goods for availing credit under the CENVAT Credit Rules, 2004.