2017 (2) TMI 96 - AT - Central Excise

CENVAT credit - whether the Chemical viz. Sodium Silico Aluminate which is a Molecular Sieve used to extract N-Pharaffin from Kerosene for manufacture of Linear Alkyl Benzene (LAB) is an Input within the meaning of Rule 57A of the Central Excise Rules, 1944? Held that - It is clear that during the entire process of manufacture from Kerosene stage to obtaining the Linear Alkyl Benzene (LAB) Sodium Silico Aluminate is indeed used which opts as a major role in the process as catalyst. As contended by the adjudicating authority, by any stretch of imagination it cannot be said this Sodium Silico Aluminate is either any equipment/ appliance/ apparatus of the plant, machinery of the appellant. It is admittedly a chemical and used during the course of manufacture, therefore in our considered view it is an input. Reliance placed in the case of Reliance Industries Ltd. Vs. CCE 2004 (4) TMI 494 - CESTAT, MUMBAI , where the credit on Molecular Sieves is admissible. Extended period of limitation - Held that - the availment of credit on Molecular Sieves was known to the department, therefore, the demand is hit by limitation also as there is no suppression of fact on the part of the appellant - demand set aside. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the Chemical "Sodium Silico Aluminate" used in the process of extracting N-Pharaffin from Kerosene for the manufacture of "Linear Alkyl Benzene" qualifies as an "Input" under Rule 57A of the Central Excise Rules, 1944.

Detailed Analysis:
The adjudicating authority initially denied Cenvat Credit for the Molecular Sieve, considering it as equipment/appliance/apparatus for production, which falls outside the definition of "inputs" under Rule 57A. The appellant challenged this denial, arguing that even if the goods are not contained in the final product, if they are used in the manufacturing process, they should be considered as inputs. Several judgments were cited to support this argument, emphasizing that goods used in or in relation to the manufacture of final products qualify as inputs. The appellant also contended that the demand was time-barred, citing previous audit opinions supporting the eligibility of the Molecular Sieve for modvat credit.

On the other hand, the Revenue representative reiterated the findings of the impugned order, maintaining that the Molecular Sieve should not be considered an input.

The Tribunal analyzed the process of manufacturing Linear Alkyl Benzene (LAB) starting from Kerosene, where the Molecular Sieve plays a crucial role in extracting N-Paraffins. The Tribunal concluded that the Molecular Sieve is indeed an input as it is a chemical used in the manufacturing process, not an equipment or apparatus. Citing a previous judgment where modvat credit was allowed for Molecular Sieves, the Tribunal held that the credit on Molecular Sieves is admissible. Additionally, the Tribunal found the demand to be time-barred, as the issue of credit on Molecular Sieves was known to the department, and there was no suppression of facts by the appellant. Consequently, the impugned order was set aside, and the appeal was allowed.