2018 (7) TMI 1270 - AT - Central Excise

CENVAT Credit - whether the appellant is entitled to Cenvat credit on U.V. Sheets (U V Coated Poly Carbonate Embossed Corrugated Profiles) falling under CETSH No.39206190 of Central Excise Tariff Act, 1985? - Held that - The courts below have committed an error of fact by considering the UV Sheets, to have been used for factory shed instead of machine shed and/or for covering machine to ensure better quality of their finished goods. The ruling of this Tribunal in the case of M/s Mukund Ltd. 2016 (3) TMI 155 - CESTAT MUMBAI is squarely applicable to he facts of the case, where it was held that appellant entitled to Cenvat credit, as the sheets so utilised partake nature of accessories of the capital goods and as such are capital goods as defined in Rule 2(a)A(iii) of CCR, 2004. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is entitled to Cenvat credit on U.V. Sheets falling under CETSH No.39206190 of Central Excise Tariff Act, 1985.

Analysis:
The appellant, a manufacturer of excisable goods, took Cenvat credit under Capital Goods for UV Sheets. Audit revealed the sheets were used for machine shed, not factory shed. Two show cause notices were issued proposing disallowance of credit and penalties. Orders confirmed demands and penalties, leading to an appeal by the appellant. The Counsel argued that the sheets were used for machine shed to ensure quality output, citing a similar Tribunal case. The Revenue supported the impugned order.

The Tribunal found an error in considering the UV Sheets for a factory shed instead of a machine shed to maintain quality output. Referring to a similar case, the Tribunal held that when sheets are utilized to cover machinery and moving parts for quality maintenance, they qualify as capital goods under CCR, 2004. Thus, the appellant was entitled to Cenvat credit. The appeal was allowed, setting aside the impugned order, granting the appellant consequential benefits, with the limitation grounds left open.

This judgment clarifies the eligibility of Cenvat credit for UV Sheets used in a machine shed for quality maintenance, distinguishing between factory and machine sheds. It emphasizes the importance of maintaining quality output in manufacturing processes and aligns with precedent cases to establish the nature of accessories as capital goods for credit eligibility.