2017 (5) TMI 1387 - AT - Central Excise

CENVAT credit - credit availed during setting up of the plant - denial of CENVAT credit on the ground that at the time of taking credit, no dutiable goods was being manufactured - N/N. 30/2004-CE dated 09/07/2004 - Held that - the input service received for the plant was used in the manufacture of dutiable goods - It is obvious that when the project work of renovation and modernization of the plant is undertaken, it takes some time and after gestation period, the plant comes into operation and whatever goods manufactured out of that plant is cleared on payment of duty. Therefore, the credit in respect of the services, which is related to the said renovation and modernization is clearly admissible to the appellants - credit allowed - decided in favor of appellant.

Summary

Issues involved:
Denial of Cenvat credit on services used for renovation and modernization of plant for manufacturing Polyester Filament Yarn under Notification No.30/2004-CE.

Analysis:
The case involved the appellant, a manufacturer of Draw Texturised Yarn (DTY) under CTH 54023300, who cleared goods under Notification No.30/2004-CE. The issue arose when the appellant undertook modernization and renovation of their plant for manufacturing Polyester Filament Yarn (POY) and availed Cenvat credit on services used for the renovation. The dispute centered around the denial of credit by the authorities on the grounds that at the time of service receipt, POY was not being manufactured, thus the credit was not used for final product manufacturing.

The appellant argued through their counsel that the credit was rightfully availed for input services related to the modernization and renovation of the plant meant for manufacturing dutiable POY. They contended that the plant was non-operational during the renovation and only became operational after the work was completed. This fact was undisputed. Additionally, the appellant cited a previous Tribunal order where a similar issue was decided in their favor, allowing Cenvat credit under identical circumstances.

On the other hand, the Revenue representative reiterated the findings of the impugned order, supporting the denial of credit by the lower authorities. However, the presiding Member, after considering both sides' submissions, disagreed with the denial of Cenvat credit. The Member found the denial based on the absence of dutiable goods during service receipt to be incorrect. The Member reasoned that the input services for the plant were ultimately used in the manufacturing of dutiable goods, and the gestation period during renovation justified the credit availed.

The Member referenced the previous Tribunal order where a similar issue was decided in favor of the appellant, emphasizing that the services related to renovation and modernization for in-house manufacturing of partially oriented yarn justified Cenvat credit. Based on this precedent and the current observations, the Member concluded that the appellant was entitled to the Cenvat credit for services related to the renovation and modernization of the plant used for manufacturing dutiable goods. Consequently, the impugned order was set aside, and the appeal was allowed.