2015 (11) TMI 553 - AT - Central Excise

Denial of CENVAT Credit - whether, the locomotive should be considered as an eligible item for the purpose of taking cenvat credit - Held that - As per the definition, goods falling under chapter 82, 84, 85, 90 and the components, spares and accessories of the goods of the said chapters are considered as capital goods, on which the assessee is permitted to take cenvat credit. Since locomotive is classified under chapter 86, and the same is not fitted to any machine(s) of the above specified chapters, as component, spares or accessories, in my opinion, locomotive is not confirming to the definition of capital goods. Thus, cenvat credit on locomotive as capital will not be available to the appellant. - disputed goods are also used for movement finished goods upto the destination point for sale. Thus, the activities carried out in the factory of the appellant with the help of locomotive, has a nexus with the manufacturing process, and as such, as per the clear and unambiguous definition of input, the locomotive cannot be denied the cenvat benefit. The case of the appellant gets support from the decision of larger bench of this Tribunal in the case of Banco Products (India) Ltd, wherein it has been held that Plastic crates used for transporting/ storing of goods in the factory will be considered as input for the purpose of Modvat credit, because in absence of proper storage and efficient movement of gods under the cover of plastic crates, the manufacturing activity will be affected. In view of the principles decided by the Larger Bench of the Tribunal, use of locomotive by the appellant for the intended purpose within the factory, will qualify for availment of cenvat credit under the head input. - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat Credit on locomotive as capital goods or input.

Analysis:
The appellant, a cement manufacturer, availed Cenvat Credit of Central Excise Duty paid on inputs and capital goods. The dispute arose regarding the denial of Cenvat Credit on a locomotive taken in November 2010. The appellant argued that the locomotive was crucial for transporting raw materials and finished goods within the factory, making the cement manufacturing process commercially viable. The appellant cited judgments to support their claim. On the other hand, the Revenue contended that the locomotive did not qualify as capital goods due to its tariff classification under chapter 86 and was not an input as it was used for shunting wagons at the railway siding. The Revenue distinguished the cited judgments based on the period and definitions involved.

The Tribunal analyzed whether the locomotive qualified as an eligible item for Cenvat Credit. The definition of 'Capital Goods' under Rule 2(a)(A) of the Cenvat Credit Rules, 2004 includes goods from specific chapters and their components, spares, and accessories. Since the locomotive fell under chapter 86 and was not associated with the specified chapters' machinery, it did not meet the definition of capital goods. The Tribunal referred to a previous decision to support this finding.

Regarding the term 'input,' defined in Rule 2(k) of the Cenvat Credit Rules, 2004, the Tribunal considered all goods used directly or indirectly in the manufacturing process as inputs. The locomotive was used for transporting raw materials and finished goods within the factory, essential for the manufacturing process's continuity. The Tribunal emphasized the nexus between the locomotive's use and the manufacturing process, citing a larger bench decision to support the appellant's claim.

Ultimately, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.