2015 (1) TMI 852 - AT - Central Excise

Disallowance of CENVAT Credit on plastic crates - Commissioner allowed credit that goods are eligible as inputs - Held that - following the decision of the Hon ble High Court of Madras 2005 (6) TMI 175 - CESTAT, CHENNAI and the Larger Bench of the Tribunal 2009 (2) TMI 101 - CESTAT AHMEDABAD , the respondents are eligible for the CENVAT credit availed on plastic crates as inputs / material handling equipment. Accordingly, I do not find any infirmity in the order passed by the lower appellate authority and uphold the same - Decided against Revenue.

Summary

Issues:
Eligibility of CENVAT credit on plastic crates as inputs or capital goods.

Analysis:
The judgment involved three appeals filed by Revenue, consolidated due to a common issue arising from a shared impugned order. The primary issue was the disallowance of credit on plastic crates by the adjudicating authority, later reversed by the Commissioner (Appeals) who deemed them eligible as inputs. Revenue challenged this decision, arguing that plastic crates are neither inputs nor capital goods, citing Chapter 39 of the CETA, 1985 for classification. The Appellant relied on specific case laws to support their stance, emphasizing the exclusion of Chapter Note 84 products from being classified as capital goods.

On the contrary, the Respondents, supported by case law references and official documents, maintained that plastic crates qualified as inputs and not capital goods. They highlighted that the appeal was based on two grounds, with the first ground referencing a Tribunal decision that was later set aside by the Hon'ble High Court of Madras. The Respondents never claimed credit on plastic crates as capital goods, as clarified in the show-cause notice and the Order-in-Appeal. The arguments put forth by the Respondents were consistent across all parties involved, emphasizing the claim for credit as inputs, not capital goods.

The judgment carefully considered the submissions from both sides, focusing on the eligibility of CENVAT credit on plastic crates. The decision referenced a Larger Bench ruling in the case of Banco Products (India) Ltd., which established that plastic crates used as material handling devices within a factory could be considered accessories aiding machinery effectiveness, thus qualifying for CENVAT credit as capital goods. The judgment extensively discussed the concept of 'accessory' in relation to capital goods, emphasizing the role of plastic crates in enhancing manufacturing efficiency and the integral part they play in the production process.

Moreover, the judgment highlighted the acceptance of the Larger Bench decision by the Department, further reinforcing the eligibility of plastic crates for credit under capital goods. Citing previous judgments and legal precedents, the judgment concluded that the Respondents were entitled to the CENVAT credit on plastic crates as inputs/material handling equipment. Relying on the decisions of the Hon'ble High Court of Madras and the Tribunal's Larger Bench, the judgment upheld the lower appellate authority's order, dismissing all three appeals filed by Revenue.