2017 (1) TMI 360 - AT - Central Excise

CENVAT credit - capital goods - denial on the ground that the laboratory in which machine was installed is in other use of the appellant which is a DTA unit and not in the factory premises of the appellant i.e. 100% EOU - whether the appellant is entitled to avail cenvat credit on capital goods which are installed outside the factory or not? - Held that - although the capital goods has been installed in the outside the factory but the same has been used in manufacture of final product of the appellant - reliance was placed in the case of JAYPEE REWA CEMENT Versus COMMISSIONER OF CENTRAL EXCISE, MP 2001 (8) TMI 1332 - SUPREME COURT OF INDIA , where it was held that the capital goods used in or relation to manufacture of the final product whether directly or indirectly are entitled for cenvat credit - the appellant is entitled to avail cenvat credit on capital goods in dispute - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of cenvat credit on capital goods installed outside the factory premises.

Analysis:
The appellant, engaged in manufacturing Insoluble Sulphur, appealed against the denial of cenvat credit on imported capital goods, specifically an Analyzer, which was found installed in a laboratory of a DTA unit outside the factory premises. The authorities below had denied the credit, leading to a demand for duty, interest, and imposition of a penalty. The appellant contended that although the machine was not in the factory, its usage for testing was undisputed, making it eligible for credit under Rule 2(a) of the Cenvat Credit Rules, 2004. Citing various precedents, the appellant argued for credit allowance.

The main issue revolved around whether the appellant could avail cenvat credit for capital goods installed outside the factory. Rule 2(a) of the CCR, 2004 mandates that capital goods must be used in the factory of the manufacturer of the final products. The Tribunal referred to the decision in Vikarm Cement case, emphasizing that usage within the factory for manufacturing qualifies for credit. Precedents like Siva Shankar Granites, Surya Colour Products, and others were also cited to support the allowance of credit even if the goods were used outside the factory premises, provided they were used in the manufacturing process.

The Tribunal rejected the argument based on the Mangal Electricals Industries case, which the Ld. AR relied on, stating it did not align with the precedents and facts of the current case. Despite the installation of capital goods outside the factory, since they were utilized in the manufacturing process, the Tribunal held that the appellant was entitled to cenvat credit. Consequently, the impugned order denying the credit was set aside, and the appeal was allowed with any consequential relief.