2017 (5) TMI 178 - AT - Central Excise

CENVAT credit - job work - eligible input - furnace oil procured and delivered to the factory of manufacture but transferred to job worker to produce and supply steam required in the factory of the appellant - denial on the ground that the place of production of steam is not the factory of production for which furnace oil had been procured and, hence, not in compliance with the definition of input in rule 2(k) of CCR - Held that - appellants had, in their reply, asserted that coal is the fuel used in the boiler at the premises of the sister unit and, hence, the utilisation of furnace oil at the premises of associate unit in the process is itself in question - also, job work does not apply to production of consumables to be used by the appellant owing to the definition of job work in rule 2(n) of CCR, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Admissibility of CENVAT credit on furnace oil transferred to job worker for steam production.

Analysis:
The appeal filed by M/s Bharat Chemicals challenges the admissibility of CENVAT credit amounting to ?1,33,446/- on furnace oil transferred to a job worker for steam production. The primary issue is whether the place of production of 'steam' qualifies as the factory of production for which the furnace oil was procured, as per the definition of input in rule 2(k) of CENVAT Credit Rules, 2004.

The appellant's contention, supported by a reference to the decision in Vikram Cement v. Commissioner of Central Excise, Indore, emphasizes that the generation of electricity/steam used outside the factory of production can still qualify as an intermediate product for availing credit on the duty payable. Additionally, the Tribunal's ruling in Commissioner of Central Excise & Service Tax, Jaipur - II v. JK Cement Works further supports the eligibility for CENVAT credit even if electricity used in manufacturing the final product is obtained from a sister unit.

Referring to the judgment in Maruti Suzuki Ltd v. Commissioner of Central Excise, Delhi-III, it is clarified that the functional utility of an item is crucial in determining its eligibility as an input for CENVAT credit. The judgment emphasizes that the input must be used in or in relation to the manufacture of the final product within the factory of production to qualify for credit, highlighting the importance of the purpose for which the input is utilized.

The Authorized Representative's arguments, based on the definition of 'job work' in rule 2(n) of CENVAT Credit Rules, 2004, are deemed inconsequential in light of the specific legal precedents cited. The impugned order is set aside, and the appeals are allowed, indicating a favorable outcome for M/s Bharat Chemicals regarding the admissibility of CENVAT credit on the furnace oil transferred to the job worker for steam production.

This comprehensive analysis of the judgment highlights the legal nuances surrounding the admissibility of CENVAT credit in the context of furnace oil utilization for steam production, drawing upon relevant legal precedents and interpretations to support the final decision in favor of the appellant.