2007 (10) TMI 211 - AT - Central Excise

Plastic crates, which were used in their factory premises for transportation, storing of raw materials & finished goods SCN issued on ground that credit not admissible on plastic crates as these are not used in or in relation to manufacture of their final products held that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product hence credit cannot be denied on them

Summary

Issues:
- Admissibility of Cenvat credit on plastic crates used in factory premises for transportation and storing of goods.
- Interpretation of "inputs" under Rule 57AA of the Central Excise Rules, 1944.
- Determination of whether plastic crates are used in or in relation to the manufacture of final products.
- Applicability of the judgment in the case of Collector of Central Excise v. Solaris Chemitech Ltd.

Analysis:
1. The appeal challenged the denial of Cenvat credit on plastic crates used in the factory premises. The appellants contended that the plastic crates were essential for efficient manufacturing processes as they facilitated proper storage of inputs, preventing deterioration and mixing with other inputs. They argued that the use of plastic crates was in relation to the manufacture of final products, as per Rule 57AA of the Central Excise Rules, 1944.

2. The Commissioner (Appeals) dismissed the appeal, stating that the plastic crates were not integrally connected with the manufacturing process and were primarily used for convenient transportation of finished goods. The adjudicating authority upheld the denial of credit, emphasizing that storing goods in plastic crates did not constitute manufacturing activity.

3. The appellants relied on the definition of "inputs" under Rule 57AA and argued that the plastic crates were crucial for maintaining efficient manufacturing processes by ensuring proper storage and maintenance of quantitative records. They emphasized the necessity of using separate crates for different inputs to avoid adverse effects on the manufacturing process.

4. The lower authority denied the credit on the grounds that storing raw materials in plastic crates did not qualify as using the crates in or in relation to the manufacture of final products. However, the appellants cited a judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise v. Solaris Chemitech Ltd., which interpreted the phrase "in relation to" broadly to encompass processes essential for manufacturing final products.

5. The Tribunal found in favor of the appellants, citing the Supreme Court judgment to support the argument that processes essential for manufacturing final products, such as the use of plastic crates for efficient storage of inputs, should be considered part of the manufacturing activity. Consequently, the appeal was allowed, and the impugned order was set aside, granting consequential relief to the appellants.