2014 (10) TMI 57 - AT - Central Excise

CENVAT Credit - Input service - Manufacturing activity - Held that - As explained in the memorandum of appeal and as submitted by the appellant before the lower authorities, deslagging spoons made from MS rounds is required to remove the layers of slag floating over the molten metal in the furnace and removal of which is necessary to avoid an accident on account of busting of the layers of slag due to accumulated gases. As regards the, patching formers it has been explained by the appellant that the same are hollow metal cylinder with both faces open and are made for placing the same inside the induction furnace crucibles after refractory lining to protect the crucibles coils from getting damaged from molten metal. Both deslagging spoon and patching formers are necessary items for manufacture of MS ingots and therefore, the inputs used for manufacture of deslagging spoon and patching formers would be eligible for Cenvat credit as inputs. The order of both the lower authorities are absurd orders passed with zero application of mind. - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of Cenvat credit on MS rounds, MS sheets, and CR coils used for making deslagging spoons and patching formers.

Analysis:
The judgment revolves around the eligibility of Cenvat credit on MS rounds, MS sheets, and CR coils used for manufacturing deslagging spoons and patching formers. The appellant, a manufacturer of steel ingots, argued that these items are crucial for their final products and should be considered as inputs for Cenvat credit. The deslagging spoons made from MS rounds are essential for removing slag layers from molten metal to prevent accidents, while patching formers made from MS sheets and CR coils protect crucible coils from damage. The appellant contended that these items get consumed in the manufacturing process due to high temperatures inside the furnace, making them integral to the production of steel ingots. The department disagreed, initiating proceedings for recovery of Cenvat credit, leading to an order confirming the demand and imposing penalties. Both the Deputy Commissioner and Commissioner (Appeals) concluded that the items were used for the captive manufacture of capital goods, citing a previous Tribunal decision. However, the presiding judge found these conclusions baseless, emphasizing the necessity of deslagging spoons and patching formers for manufacturing steel ingots. The judge criticized the lower authorities for not considering the appellant's argument and for misapplying the previous Tribunal decision, deeming their orders absurd. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment clarifies the eligibility of Cenvat credit on specific items used in the manufacturing process, highlighting the importance of understanding the direct relation of such items to the final product. The judge's detailed analysis underscores the necessity of deslagging spoons and patching formers in the production of steel ingots, emphasizing their role as essential inputs deserving of Cenvat credit. The judgment serves as a reminder of the need for thorough consideration of arguments and relevant factors in such cases, ensuring a fair and reasoned decision based on the specific circumstances presented.