2007 (1) TMI 182 - HC - Central Excise

Cenvat Credit Input versus capital goods Catalyst appellant taken credit on catalyst within the category of capital goods revenue rejected the same being catalyst is not an eligible capital good falling under heading 3815 - it is very clear that the Tribunal had taken a consistent view that the catalyst is only input and not capital goods as claimed by the assessee. Further, it was also brought to our notice that the Tribunal by order dated 3-7-2003 in assessee s own case for the earlier period had taken a view that the catalyst is an essential input to accelerate the production and also it is a required input for manufacture of the final product and hold that the catalyst is only input and granted relief to the assessee in appeal E/461/02 Tribunal s order upheld.

Summary

Issues:
Classification of catalyst as inputs or capital goods under the Central Excise Act, 1944.

Analysis:
The appellant challenged the final order of the Central Excise and Service Tax Appellate Tribunal regarding the classification of catalyst as inputs instead of capital goods. The substantial questions of law raised included whether the Tribunal erred in classifying catalyst as inputs, the correctness of holding catalyst as inputs based on usage rather than identity, and the treatment of catalyst as accessories to a converter. The appellant, engaged in manufacturing copper anode, sulphuric acid, and phosphoric acid, availed Cenvat credit on a sulphuric acid catalyst. The Revenue contended that the catalyst should be treated as inputs, not capital goods. The Assistant Commissioner initially held that the catalyst did not qualify as capital goods but allowed Cenvat benefit as an input. The Commissioner of Central Excise (Appeals) reversed this decision, considering the catalyst as capital goods. However, the Tribunal ruled in favor of treating the catalyst as inputs, citing previous decisions and emphasizing the essential role of catalysts in the manufacturing process. The Tribunal's decision was upheld by the High Court, noting the consistent view that catalysts are inputs essential for production, leading to the dismissal of the appeal.

The appellant's arguments emphasized the definition of inputs in the manufacturing process, the distinction between inputs and by-products, and the role of catalysts in reaction rates without being consumed. The appellant also referred to the treatment of the converter and catalyst as capital goods upon commissioning. The Revenue's position focused on the classification of the sulphuric acid catalyst as inputs and relied on various Tribunal decisions supporting this classification. The Tribunal, after considering the arguments and case laws presented, concluded that the catalyst should be treated as inputs, as it plays a crucial role in the manufacturing process and is not consumed during reactions. The High Court concurred with the Tribunal's decision, emphasizing the importance of catalysts as inputs for production and the absence of contradictory judgments or compelling reasons to overturn the decision.

In conclusion, the High Court upheld the Tribunal's decision to classify the catalyst as inputs rather than capital goods, based on its essential role in the manufacturing process and consistent legal interpretations. The appeal was dismissed in favor of the Revenue, highlighting the Tribunal's valid reasoning and the absence of compelling arguments to challenge the classification of catalysts.