2007 (12) TMI 49 - AT - Central Excise

Credit allowed on cement & CTD bars as these are support of capital goods credit allowed on cellars as they are technically necessary & integral part of plant Mfg. process requires controlled temp. & dust free environment so credit is allowed on roofing material used to provide cover for plant aluminum wires/cable/conductors, electricity transmitting tower welding electrodes, wires are eligible but credit is disallowed on excavators & material handling equipment i.e. tippers & spares

Issues Involved:
1. Credit on Cement and Steel
2. Credit on Roofing Material
3. Credit on Excavator, Tippers, and Spares
4. Credit on Other Miscellaneous Items
5. Credit on Welding Electrodes/Wires, Aluminum Wires/Cables/Conductors, and Electricity Transmitting Tower

Detailed Analysis:

1. Credit on Cement and Steel:
The primary issue was whether cement and steel bars used for various foundational and structural purposes within the factory qualify for CENVAT credit. The Commissioner denied credit on these items, arguing that foundations made of RCC cannot be dismantled and are part of civil construction, thus not qualifying as components of capital goods. However, the Tribunal found that these materials are used in essential manufacturing processes, such as making foundations for machinery, constructing chimneys, and creating tunnels and trenches for utilities, deeming them integral to the plant's operation. The Tribunal noted that the functional necessity of these structures for the Cold Rolling Mill (CR Mill) was demonstrated during a factory visit. The Tribunal cited various judgments, including the Supreme Court's ruling in Jawahar Mills Ltd., to support the admissibility of credit on these items, concluding that they are components of the plant.

2. Credit on Roofing Material:
The Commissioner denied credit on roofing materials like GPCC Core/Trap Sheet and Blendster, considering them non-essential. However, the Tribunal found that these materials are crucial for maintaining controlled temperature and dust-free environments necessary for manufacturing processes like Pickling, Cold Rolling, and Galvanizing. The Tribunal emphasized that protective covers are essential to prevent environmental exposure, which could adversely affect the quality of the final products. Therefore, the Tribunal allowed credit on roofing materials.

3. Credit on Excavator, Tippers, and Spares:
The Tribunal upheld the Commissioner's decision to deny credit on excavators, tippers, and spares. These items were used for activities such as land leveling before production and were classified under Chapter 87, which is excluded from the definition of capital goods. The Tribunal agreed that these items did not directly contribute to the manufacturing process and thus did not qualify for credit.

4. Credit on Other Miscellaneous Items:
The Tribunal found that the Commissioner incorrectly denied credit on various miscellaneous items, which the appellants claimed were components, parts, or accessories of capital goods. The Tribunal noted that the Commissioner did not dispute the appellants' claims but still denied credit. Therefore, the Tribunal allowed credit on these miscellaneous items, recognizing their role as essential components of capital goods.

5. Credit on Welding Electrodes/Wires, Aluminum Wires/Cables/Conductors, and Electricity Transmitting Tower:
The Department appealed against the credit allowed on welding electrodes/wires, aluminum wires/cables/conductors, and electricity transmitting towers. The Tribunal found that welding electrodes/wires were used for producing or processing components of capital goods, not for repairs or maintenance, thus qualifying for credit. Aluminum wires/cables/conductors and electricity transmitting towers were deemed essential for transferring power within the factory, aligning with previous judgments like Sanghvi Industries and Jawahar Mills. Therefore, the Tribunal upheld the credit on these items.

Conclusion:
The Tribunal allowed the appeal of the assessee, granting credit on cement, steel, roofing materials, and various miscellaneous items, while denying credit on excavators, tippers, and spares. The Department's appeal was rejected, affirming the credit on welding electrodes/wires, aluminum wires/cables/conductors, and electricity transmitting towers.

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