2014 (3) TMI 662 - AT - Central Excise

Denial of CENVAT Credit - whether racks are capital goods - Procurement of racks of various sizes falling under heading No. 73.26, for storage of the final products, terry towels, packed in cartons before removal/dispatch - Held that - in relation to the manufacture have been used to widen and expand the scope, meaning and content of the expression inputs so as to attract goods which do not enter into finished goods. In the case of M/s. J.K. Cotton Spinning and Weaving Mills, Co. Ltd. v. The Sales Tax Officer, Kanpur and another - 1964 (10) TMI 2 - SUPREME COURT OF INDIA , Supreme Court has held that Rule 57A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw-material is used in the manufacture of final product it is an input used in the manufacture of final product. However, the doubt may arise only in regard to use of some articles not in the mainstream of manufacturing process but something which is used for rendering final product marketable or something used otherwise in assisting the process of manufacture. This doubt is set at rest by use of the words used in relation to manufacture - Following decision of CCE & Ors. v. Solaris Chemtech Ltd. & Ors 2007 (7) TMI 2 - SUPREME COURT OF INDIA - Decided in favor of assessee.

Summary

Issues:
Interpretation of the definition of "capital goods" under the Cenvat Credit Rules for the eligibility of Cenvat credit on procured racks used for storage of final products.

Analysis:
The case involved M/s. Welspun India Ltd. procuring racks for storage of final products and claiming Cenvat credit. The Revenue contended that the credit was not available as per the definition of capital goods. The Commissioner (Appeals) upheld the Revenue's view, stating it was not a case of interpretation of law. The primary issue was whether the racks used by the appellants fell under the definition of "capital goods" as per the Cenvat Credit Rules.

The Commissioner (Appeals) referenced the Larger Bench judgment in Banco Products (India) Ltd. v. CCE, Vadodara, where plastic crates were held not to be capital goods. However, the Tribunal in the same case clarified that proper storage of inputs is crucial for the manufacturing process, and transportation using such accessories is integral to production. The Tribunal cited the Hon'ble Supreme Court's observation in M/s. Rajasthan State Chemical Works, emphasizing the importance of transportation in the manufacturing process.

Additionally, the Tribunal referred to cases like Pallipalayam Spinner (P.) Ltd. v. CCE, Salem and Geltec Pvt. Ltd. v. CCE, Bangalore, supporting the eligibility of similar items for credit. The Hon'ble Supreme Court's decision in CCE & Ors. v. Solaris Chemtech Ltd. & Ors. highlighted the broad interpretation of "inputs" and "used in relation to manufacture," emphasizing the inclusion of goods assisting the manufacturing process.

Based on the discussions and precedents, the Judge found the Commissioner (Appeals)'s order unsustainable and allowed the appeal filed by M/s. Welspun India Ltd. The judgment favored the appellant, granting consequential relief, if any, on 15-12-2011.