2014 (5) TMI 908 - AT - Central Excise

CENVAT Credit - capital goods - movement (transport) of Hydrogen Gas Cylinder outside factory premises for refilling etc. - Held that - A perusal of the of Rule 2 (a) (A) reveals that the only condition for availing CENVAT Credit on capital goods is their use within the factory of the manufacturer in the manufacture of final products. It is not disputed that the Hydrogen Cylinders are not capital goods. At present there is no requirement under the CENVAT Credit Rules that the capital goods must be installed in the factory of production. Evidently, hydrogen gas cylinders are used within the respondent s factory for manufacture of final products, although the cylinders move out temporarily from the appellant s factory for the purpose of refilling of hydrogen gas. Therefore, the requirement of use of capital goods within the appellant s factory in terms of the said Rule 2(a)(A) is fulfilled. - Therefore, the temporary to and fro movement of Hydrogen Gas Cylinders for the purpose of refilling of hydrogen gas is otherwise covered by the above provisions of the CENVAT Credit Rules, 2004 - Further, reversal of credit at the time of removal of Cylinders and taking of credit at the time of receipt of duly filled Cylinders will not help Revenue in raising any Revenue as it is Revenue neutral exercise - Decided against Revenue.

Summary

Issues:
CENVAT Credit on Hydrogen Cylinders - Use in factory, Installation requirement, Capital Goods definition, Rule 4(5)(a) of CENVAT Credit Rules, Scope of show cause notice, Revenue neutral exercise.

Analysis:

1. CENVAT Credit on Capital Goods Use in Factory:
The case involved a dispute regarding the availing of CENVAT Credit on Hydrogen Cylinders by the respondent for use in their factory. The Revenue objected to the credit, arguing that the cylinders were not installed in the factory. However, the respondent contended that the cylinders were directly used in the manufacture of final products, satisfying the conditions under Rule 2(a)(A) of the CENVAT Credit Rules, 2004. The Tribunal agreed with the respondent, noting that the requirement was the use of capital goods within the factory, not their installation. The temporary movement of cylinders for refilling did not negate their use within the factory, fulfilling the rule's criteria.

2. Rule 4(5)(a) of CENVAT Credit Rules:
The Tribunal also considered Rule 4(5)(a) of the CENVAT Credit Rules, which allowed for the movement of inputs or capital goods to a job worker and their subsequent return within a specified period. The rule permitted the taking of CENVAT credit again upon the return of the goods. In this case, the temporary movement of Hydrogen Gas Cylinders for refilling purposes fell within the provisions of this rule, further supporting the respondent's position.

3. Scope of Show Cause Notice and Revenue Neutral Exercise:
The respondent argued that the appeal proceedings should not exceed the scope of the show cause notice, emphasizing that the reversal and re-availment of credit for the cylinders was a revenue-neutral exercise. The Tribunal acknowledged these arguments and concluded that such exercises did not impact revenue collection. Consequently, the appeal filed by the Revenue was rejected based on the observations made during the proceedings.

In summary, the Tribunal upheld the respondent's right to claim CENVAT Credit on the Hydrogen Cylinders, emphasizing their use in the factory for the manufacture of final products, in accordance with the relevant rules. Additionally, the Tribunal considered the provisions of Rule 4(5)(a) and the revenue-neutral nature of the credit reversal exercise, leading to the rejection of the Revenue's appeal.