2006 (10) TMI 95 - HC - Central Excise

Whether rope asbestos and graphite asbestos used by the manufacturer for sealing the holes in their Cement plant and machinery are covered under the definition of Capital goods to avail credit impugned items necessary for smooth and efficient running of the machinery - other items namely wire rope is also used as a hoist in raw mill, cement mill, essential for completing the manufacture Credit allowable.

Summary

Issues:
Claim of Cenvat credit for rope asbestos and graphite asbestos under the Central Excise Act, 1944.

Analysis:
The appeal was made against the order of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, regarding the claim of cenvat credit by the respondent manufacturer for rope asbestos and graphite asbestos used in sealing holes in their plant and machinery. The main question of law revolved around whether these items qualified as capital goods under the Cenvat Credit Rules, 2001. The assessee had availed cenvat credit for these items, considering them essential for manufacturing cement at their plant during specific periods.

The Dy. Commissioner, Central Excise, initially disallowed the cenvat credit for rope asbestos/graphite asbestos and wire rope, stating that they were not components, spares, or accessories to any plant and machinery. Subsequently, the Commissioner (Appeals) partly allowed the appeal, permitting cenvat credit for wire ropes used in the packing department but disallowing it for asbestos/graphite asbestos. The Tribunal, in the order under appeal, allowed the claim for rope asbestos, noting that the Commissioner (Appeals) had approved modvat credit for similar goods for a subsequent period, rendering the earlier cenvat credit invalid.

The judgment emphasized the importance of accessories that contribute to the smooth functioning of machinery in the manufacturing process. Citing relevant legal precedents, the court highlighted that accessories need not have a direct involvement in the primary function of the machine to be considered capital goods eligible for modvat credit. In this case, the rope asbestos/graphite asbestos were crucial for maintenance and efficient operation of cement manufacturing machinery, while wire rope served as a hoist in various departments. These activities were deemed essential for completing the manufacturing process, leading to the conclusion that the machines involved could not be excluded as capital goods used in production.

Based on the above analysis, the court found no merit in the appeal and dismissed it, without any order as to costs.