2008 (2) TMI 266 - AT - Central Excise

Denial of credit on parts and components of capital goods revenue alleged in SCN that credit were admissible to the contractor who was the manufacturer of individual machines and not to the appellants Commissioner traveled beyond scope of SCN while denying credit on ground that machines viz. cooling towers, strip caster are immovable property - held that credit cannot be denied as the parts and components were used in the immovable property - appeals are allowed

Summary

Issues:
Denial of credit on parts and components of capital goods.

Analysis:
The appellants filed appeals against the denial of credit on parts and components of capital goods, as alleged in the show cause notice that the Cenvat credit on these components was admissible to the contractor who manufactured individual machines and not to the appellants. The Adjudicating Authority dropped the proceedings, but the Revenue appealed before the Commissioner (Appeals) who set aside the adjudication order.

The learned Advocate argued that the Commissioner (Appeals) exceeded the show cause notice's scope, citing precedents like Mahalakshmi Glass Works Ltd. and Gujarat Ambuja Cements Ltd. to support the appellants' claim. He emphasized that the parts and components were used in the appellants' factory for manufacturing machines.

On the other hand, the learned DR supported the Commissioner (Appeals) findings, asserting that the transaction was on a principal-to-principal basis and that the appellants were not entitled to credit as the machines were manufactured by Paharpur Cooling Towers, where the parts and components were used.

Upon review, it was observed that duty paying documents were issued in the name of the appellants, and the parts were utilized in their factory for manufacturing final products. The Adjudicating Authority noted that the parts were used in the factory of the manufacturer of the final products, justifying the appellants' entitlement to credit.

The Commissioner (Appeals) primarily denied credit on the basis that the machines were deemed immovable property, a decision beyond the show cause notice's scope. Considering precedents and the actual usage of parts in the factory, the Tribunal set aside the Commissioner (Appeals) order, restoring the adjudication order and allowing the appeals with consequential relief.