2015 (10) TMI 510 - AT - Central Excise

Denial of CENVAT Credit - Whether CENVAT credit will be admissible with respect to lead ingots, used for internal lining of chemical reaction vessels - held that - CESTAT Delhi relied upon the case law of Union of India vs. Hindustan Zinc Ltd. 2006 (5) TMI 44 - HIGH COURT RAJASTHAN and Union of India vs. Hindustan Zinc Ltd. 2006 (11) TMI 551 - SUPREME COURT OF INDIA . M.S. Plates, beam, angles, channels etc. are also not capable of being used directly as component or parts of the machinery for maintenance and repair. Further, CESTAT Mumbai in the case of Century Rayon vs Commissioner of Central Excise, Mumbai-III (2003 (11) TMI 507 - CESTAT, MUMBAI) also held that lead ingots used for making corrosion resistant lining will be eligible for CENVAT credit. - In view of settled proposition of law CENVAT credit with respect to lead ingots used for protective coating/lining of the chemical reaction vessels will be eligible for CENVAT credit - Decided in favour of assessee.

Summary

Issues:
Eligibility for CENVAT credit under Cenvat Credit Rules, 2004 regarding the use of lead ingots for coating chemical reaction vessels.

Detailed Analysis:

1. Argument by Appellant:
- The appellant argued that coating the reaction vessels with lead ingots is essential due to the corrosive nature of certain chemical reactions involved in manufacturing chemicals.
- Cited case laws like Birla Corporation Ltd. vs Commissioner of Central Excise, Jaipur-II and Century Rayon vs Commissioner of Central Excise, Mumbai-III to support eligibility for CENVAT credit.

2. Argument by Revenue:
- The Revenue contended that lead ingots used for coating are not eligible for CENVAT credit as they are neither inputs nor capital goods.
- Referenced previous judgments to support the argument that lead ingots are similar to welding electrodes for repair of capital goods and thus not eligible for credit.

3. Court's Analysis:
- Examined the definition of capital goods under Rule 2(a)(A) of Cenvat Credit Rules, 2004.
- Identified that lead ingots are not components, spares, or accessories of capital goods but are used as accessories to improve the effectiveness of the main article, i.e., chemical reaction vessels.
- Referred to a case involving M.S. Plates, beams, angles, etc., where CESTAT Delhi allowed CENVAT credit for items used in repair and maintenance of machinery.

4. Precedent and Decision:
- CESTAT Delhi and CESTAT Mumbai rulings supported the eligibility of lead ingots for making corrosion-resistant linings for CENVAT credit.
- Based on the observations and established legal principles, the Court concluded that CENVAT credit for lead ingots used in protective coating/lining of chemical reaction vessels is permissible.

5. Conclusion:
- The appeal was allowed, and it was determined that lead ingots used for protective coating/lining of chemical reaction vessels are eligible for CENVAT credit.

This detailed analysis of the judgment showcases the arguments presented by both parties, the legal principles applied by the Court, and the final decision reached regarding the eligibility for CENVAT credit in the specific context of using lead ingots for coating chemical reaction vessels.