2013 (12) TMI 925 - AT - Central Excise

Eligibility for cenvat credit - Sweet on paste used to reduce the abrasion of machinery Held that - The use of SOP has to be treated as in or in relation manufacture of final product Singh Alloys & Steel Ltd. v. Assistant Collector of Central Excise 1993 (1) TMI 97 - HIGH COURT AT CALCUTTA - Dolopatch mix magnesite peas and ramming mass used in the course of manufacture of steel ingots to prevent damage to the refractory lining of the furnace are eligible for input and that the definition of input is not depended upon what ought to be used but what is in fact used or what is commercially expedient to use - though in theory the manufacture of cement is possible without the use of SOP but it is not disputed that the use of SOP reduces the obsession and thereby enhances the productivity thus the SOP has to be treated as an input and hence would be eligible for Cenvat credit Decided in favour of Assessee.

Summary

Issues: Classification of Sweet on Paste (SOP) under Central Excise duty, eligibility for Cenvat credit.

Classification of Sweet on Paste (SOP) under Central Excise duty:
The case involved the classification of Sweet on Paste (SOP) used by the appellant, who are manufacturers of cement and clinker chargeable to Central Excise duty. The SOP was classified under heading 3810 10 10 and was used to reduce abrasion in machinery, thereby increasing efficiency. The department contended that SOP was neither an input nor capital goods, making it ineligible for Cenvat credit. The Assistant Commissioner confirmed a Cenvat credit demand against the appellant, which was upheld by the Commissioner (Appeals) in a common Order-in-Appeal dated 29-10-2010, leading to the filing of two appeals.

Eligibility for Cenvat credit:
The appellant argued that SOP, by reducing abrasion and enhancing machinery efficiency, had a nexus with the manufacture of the final product, thus falling within the definition of an input. Citing precedents such as the Tribunal's judgment in Dhampur Sugar Mills Ltd. v. CCE, Meerut-II and the Calcutta High Court's ruling in Singh Alloys & Steel Ltd. v. Assistant Collector of Central Excise, the appellant claimed that items used for protection and efficiency enhancement were eligible for Cenvat credit. On the other hand, the Departmental Representative defended the impugned order by supporting the Commissioner (Appeals) findings.

Judgment:
After considering both parties' arguments and reviewing the record, the judge found that the use of SOP indeed reduced abrasion and increased machinery efficiency, directly impacting the manufacturing process. Drawing parallels with the Calcutta High Court's decision in Singh Alloys & Steel Ltd. v. ACCE, the judge emphasized that the definition of an input should be based on what is actually used or commercially expedient to use, rather than what could be used theoretically. Despite the possibility of manufacturing cement without SOP, its practical benefits in reducing abrasion and enhancing productivity made it commercially expedient to use. Therefore, the judge held that SOP qualified as an input eligible for Cenvat credit. Consequently, the impugned order disallowing the credit was set aside, and the appeals were allowed.