2008 (7) TMI 198 - AT - Central Excise

Credit on inputs used in mfg. of PVC resin - BORAQUAT C508 to prevent the pilling and oxidation of cooling water in the pipes is eligible for credit - HYDRAZINE HYDRATE used to remove nascent Oxygen to prevent oxidation in the pipes carrying water to boiler is also eligible for credit as input

Summary

Issues:
- Appeal against denial of CENVAT credit on specific inputs such as BORAQUAT C508, BIOCIDE H 300, HCL, and HYDRAZINE HYDRATE.
- Eligibility of the impugned inputs for Modvat credit.
- Comparison with previous judgments like ACC v. CCE and Orient Paper Mills v. CCE, Indore.
- Interpretation of the nexus between inputs and manufacturing activity for credit eligibility.

Analysis:
The appeal before the Appellate Tribunal CESTAT CHENNAI involved a dispute over the denial of CENVAT credit on inputs including BORAQUAT C508, BIOCIDE H 300, HCL, and HYDRAZINE HYDRATE. The Commissioner (Appeals) had allowed the appeal filed by the respondent, M/s. Chemplast Sanmar Limited, based on the use of these inputs in their manufacturing process. The impugned inputs were crucial for various purposes such as maintaining the quality of demineralized water, preventing biological growth in the PVC plant, and enhancing the PH factor in the cooling tower. The Commissioner (Appeals) relied on precedents like ACC v. CCE and Orient Paper Mills v. CCE, Indore to support the eligibility of these inputs for Modvat credit.

The Tribunal considered the arguments presented by the Revenue, citing the Orient Paper Mills case where certain inputs were deemed ineligible for credit as they were not directly used in the manufacturing process. However, in the current case, the impugned inputs were found to have a direct nexus with the manufacturing activity of the final products. The inputs played a crucial role in maintaining the quality and efficiency of the manufacturing process, ensuring the production of superior quality PVC resin. The Tribunal upheld the findings of the Commissioner (Appeals) regarding the essential nature of the impugned inputs for the manufacturing process.

The Tribunal emphasized the importance of the nexus between the inputs and the manufacturing activity for determining their eligibility for credit. It was established that inputs used for protecting equipment and ensuring the smooth operation of the manufacturing process are considered eligible inputs for credit. The Tribunal referred to previous judgments like ACC v. CCE and Orient Paper Mills v. CCE, Indore to support the decision to allow Modvat credit for the impugned inputs. The Tribunal concluded that as long as the inputs have a direct connection with the manufacturing activity and contribute to maintaining the quality and efficiency of the process, they should be eligible for credit. Consequently, the appeal filed by the Revenue was dismissed, affirming the decision in favor of the respondent, M/s. Chemplast Sanmar Limited.