2013 (12) TMI 926 - AT - Central Excise

Denial of Credit Capital goods not installed on registered factory premises - Whether the jetty and the pipelines that connect the factory on shore would be treated as an integral part of the factory or not Held that - The pipelines are owned by the applicant and further, the applicant obtained the licence from the Port authorities for use of the jetty to transport their raw material through pipelines to their factory on shore - the applicant is directed to deposit Rupees Ten lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues Involved:
- Denial of CENVAT credit on Ethylene unloading arm and pipes
- Dispute over registration of jetty and pipelines as integral part of the factory
- Interpretation of "Capital Goods" under CENVAT Credit Rules, 2004

Analysis:
1. Denial of CENVAT Credit on Ethylene Unloading Arm and Pipes:
The appellant, engaged in manufacturing 'Caustic Soda Lye' and 'Ethylene-dichloride,' faced denial of CENVAT credit on Ethylene unloading arm and pipes installed outside the factory premises. The Commissioner confirmed the denial under Rule 14 of CENVAT Credit Rules, 2004, and imposed interest and penalty. The appellant argued that the items were essential for manufacturing as the imported Ethylene was received through pipelines from a Marine Transfer Facility (MTF) to the factory. The dispute centered on whether the jetty and pipelines connecting the factory were integral to the factory, citing precedents like Finolex Industries Ltd and Vikram Cement cases.

2. Dispute Over Registration of Jetty and Pipelines:
The appellant contended that the jetty and pipelines connecting the factory with the MTF were essential components of the manufacturing process and should be considered part of the factory. Despite obtaining registration from Port authorities for the jetty and pipelines, Central Excise authorities denied registration. The appellant relied on legal precedents to support their argument, emphasizing that the jetty and pipelines were integral to the factory's operations and fell within the definition of 'Factory' under the Central Excise Act, 1944.

3. Interpretation of "Capital Goods" under CENVAT Credit Rules:
The Revenue representative argued that capital goods, as per Rule 2a(A) of CENVAT Credit Rules, must be used within the factory premises to be eligible for credit. Citing precedents like Vikas Industrial Gas and Sanghi Industries Ltd., the representative contended that items not installed within the factory premises were ineligible for credit. The Tribunal noted the dispute regarding the treatment of the jetty and pipelines as integral to the factory, with arguments based on various legal decisions. The Tribunal found merit in the Revenue's argument that the capital goods must be used within the factory premises, directing the appellant to deposit a specified amount while staying the recovery of the balance dues pending appeal resolution.

This detailed analysis of the judgment highlights the key issues of denial of CENVAT credit, the dispute over registration of jetty and pipelines, and the interpretation of "Capital Goods" under the CENVAT Credit Rules, providing a comprehensive understanding of the legal complexities involved in the case.