2016 (3) TMI 155 - AT - Central Excise

Cenvat Credit availed on the Cement Sheets (A C Sheets) and Corrugated Aluminum Sheets disallowed - non qualification as capital goods as defined in Rule 2(a) (A) of Cenvat Credit Rules, 2004 - Held that - It is an admitted fact that the sheets in question on which Cenvat Credit have been availed have been realized for providing cover to the machinery and its moving parts in order to protect them from dust particles etc. and to maintain temperature for good quality of output, more particularly in view of the fact that the factory is fitted with overhead cranes which runs on gantry throughout the factory shed from one corner to other. As such there is a probability of material falling on the machines and its moving parts. Further, it is not disputed by Revenue that the sheets in question have been utilized to provide cover to the accessories in the automatic wire mill plant. In this view of the matter, hold that the appellant is entitled to Cenvat credit as the sheets so utilized portable nature of accessories of the capital goods and as such are capital goods as defined in Rule 2(a)A(iii) of the Cenvat Credit Rules 2004. Thus, the appeal is allowed and the impugned order is set aside. The adjudicating authority is directed to give cash refund of the interest paid by the appellant which was paid by challan and the appellant is entitled to take back cenvat credit of the amount so reversed. The adjudicating authority shall disburse the cash refund within a period of 45 day from the date of receipt of copy of this order. - Decided in favour of assessee

Issues:
- Disallowance of Cenvat Credit on Cement Sheets and Corrugated Aluminum Sheets
- Interpretation of Rule 2(a)(A) of Cenvat Credit Rules, 2004
- Classification of sheets as capital goods or components/parts/accessories
- Applicability of previous Tribunal rulings
- Admissibility of Cenvat Credit on protective cover sheets

Analysis:

Issue 1: Disallowance of Cenvat Credit on Cement Sheets and Corrugated Aluminum Sheets
The appellant appealed against the disallowance of Cenvat Credit on Cement Sheets and Corrugated Aluminum Sheets by the order-in-appeal. The disallowance was based on the argument that these sheets did not qualify as capital goods as per Rule 2(a)(A) of Cenvat Credit Rules, 2004. The appellant argued that these sheets were essential for the quality output of the products and should be considered as capital goods.

Issue 2: Interpretation of Rule 2(a)(A) of Cenvat Credit Rules, 2004
The Tribunal analyzed the definition of capital goods under Rule 2(a)(A) of the Cenvat Credit Rules, 2004. The appellant contended that the sheets in question, used for covering machinery and providing protection from dust, were accessories of capital goods and thus fell within the definition of capital goods under the rule.

Issue 3: Classification of sheets as capital goods or components/parts/accessories
The Commissioner (Appeals) dismissed the appeal, stating that the sheets used by the appellant could not be specified as capital goods. It was observed that the sheets were used for providing protective cover and were considered part of the structure created in the factory. The Tribunal, however, held that the sheets were essential for the smooth running and quality output of the machinery, thus qualifying as capital goods.

Issue 4: Applicability of previous Tribunal rulings
The appellant cited previous Tribunal rulings and court decisions to support their claim for admissibility of Cenvat Credit on the sheets. The Tribunal considered these precedents, including the user test evolved in previous judgments, to determine the eligibility of the appellant for Cenvat Credit on the protective cover sheets.

Issue 5: Admissibility of Cenvat Credit on protective cover sheets
After considering the arguments from both sides, the Tribunal concluded that the sheets utilized for covering machinery and providing protection were essential accessories of capital goods. The Tribunal held that the appellant was entitled to Cenvat Credit on these sheets as per Rule 2(a)(A)(iii) of the Cenvat Credit Rules, 2004. The impugned order was set aside, and the appellant was directed to receive cash refund of the interest paid and take back the Cenvat credit amount.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of the protective cover sheets as accessories of capital goods, thus entitling the appellant to Cenvat Credit.

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