2012 (8) TMI 853 - AT - Central Excise

CENVAT Credit - cenvat credit in respect of High Pressure gauge, Electric Machine Pump, RTD sensor, Thermo Couple, P.H. Electrode, Carbon filled bush, Branded Gland packing and Gland packing - Held that - In respect of carbon filled bush and PH electrode, both are parts of machineries and get consumed when the machineries are used and therefore have been held as consumables. Just because they have to be frequently replaced, it cannot be said that they are in the nature of capital goods. Further, it also cannot be said that just because after some time they are required to be replaced, they cease to be part/accessory of the machine. Under these circumstances, the credit is to be allowed on carbon filled bush and PH electrode. As regards branded gland packing and gland packing, these items have been used to arrest leakages in pumps, heat exchangers and compressors - leakage is plugged the products used for plugging the leakage and ensured that the leakage does not occur in the machine/wall whatever it is. In reality they become part and parcel of the machine and so long as they are intact the leakage does not happen. In view of the above, the credit is rightly available on these items - Decided against Revenue.

Summary

Issues:
- Eligibility of cenvat credit for various items including High Pressure gauge, Electric Machine Pump, RTD sensor, Thermo Couple, P.H. Electrode, Carbon filled bush, Branded Gland packing, and Gland packing.
- Classification of items as accessories or consumables affecting credit availability.
- Interpretation of previous tribunal decisions on similar cases.

Eligibility of Cenvat Credit:
The judgment addressed the eligibility of the respondent for cenvat credit on multiple items. For High Pressure gauge, Electric Machine Pump, RTD sensor, and Thermo Couple, the Revenue contested that these items were not clearly identified as accessories to specific machines. However, the respondent argued, citing Banko Products India Ltd. Vs. CCE, that accessories need not be linked to a particular machine. The judge found merit in this argument, applying the decision of the Larger Bench, and ruled in favor of granting credit for these items.

Classification of Items as Accessories or Consumables:
Regarding P.H. Electrode, Carbon filled bush, Branded Gland packing, and Gland packing, the Revenue claimed these were consumables, thus not eligible for credit as capital goods. The judge differentiated this case from Oswal Overseas Ltd., where welding electrodes were in question for repairs and maintenance. In the present case, Carbon filled bush and P.H. Electrode were considered consumables as parts of machinery, not capital goods. The judge emphasized that frequent replacement does not alter their nature. Similarly, Branded Gland packing and Gland packing were deemed integral to preventing leakages in machines, aligning with the decision in KCP Sugar Industries Ltd. These items were seen as becoming part of the machinery, warranting credit availability.

Interpretation of Previous Tribunal Decisions:
The judgment extensively analyzed previous tribunal decisions to determine the applicability of legal principles to the current case. By referencing Banko Products India Ltd. and KCP Sugar Industries Ltd., the judge justified the allowance of cenvat credit for items considered accessories or integral to machinery. Additionally, the judge clarified the distinction between consumables and capital goods based on the specific usage and function of the items in question, ensuring a thorough examination of relevant precedents to reach a fair decision.

This detailed analysis of the judgment highlights the considerations made regarding the eligibility of cenvat credit for various items, the classification of items as accessories or consumables, and the interpretation of previous tribunal decisions to guide the decision-making process.