2008 (5) TMI 218 - AT - Central Excise

Credit on Plastic crates used in manufacture of cotton yarn and man made yarn impugned plastic crates are used within the mill to transfer the yarn (intermediate product) from one section to another section in the process of completing the manufacture of final products - Plastic crates have therefore, to be held as accessories to the textile machinery. Therefore, the impugned goods satisfy the definition of Rule 2(b) of CCR credit is allowed

Summary

Issues:
1. Classification of plastic crates as capital goods eligible for credit.
2. Interpretation of the term 'accessories' in the context of machinery.
3. Application of legal precedents in determining the eligibility of plastic crates for credit.

Analysis:
1. The issue in this case revolves around the classification of plastic crates as capital goods eligible for credit under the Cenvat Credit Rules, 2002. The appellant, engaged in the manufacture of cotton yarn and man-made yarn, claimed that the plastic crates used in their mill for transferring intermediate products were capital goods. They relied on legal precedents to support their claim, arguing that the plastic crates were essential for the manufacturing process.

2. The interpretation of the term 'accessories' in relation to machinery is crucial in determining the eligibility of the plastic crates for credit. The Tribunal considered the definition of accessories as objects that assist in the operation of machinery, adding to its convenience or effectiveness. Citing a judgment of the Apex Court, the Tribunal concluded that plastic crates were accessories to the machinery used in the manufacturing process, essential for handling intermediate products efficiently.

3. Legal precedents played a significant role in the decision-making process. The Tribunal analyzed previous judgments where similar items were classified either as inputs or capital goods. By comparing these precedents and the specific usage of plastic crates in the appellant's factory, the Tribunal concluded that the plastic crates were indeed accessories to the textile machinery, making them eligible for credit under the Cenvat Credit Rules.

In conclusion, the Tribunal found that the plastic crates used by the appellant were integral to the manufacturing process, qualifying as accessories to the machinery and thus eligible for credit. The impugned order demanding repayment of duty paid on the plastic crates was deemed not in accordance with the law, leading to the allowance of the appeal filed by the appellant.