2021 (5) TMI 606 - AT - Central Excise

CENVAT Credit - capital goods - lead and articles thereof, viz, lead ingot, lead dross and lead sheet classifiable under chapter 78 - period April 2005 to January 2010 - HELD THAT - The goods in question have been used in the repair and maintenance which is not in dispute and the same has been duly recorded by the Ld. Commissioner in para 5.4 of the impugned order in page no. 14. After taking note of the diagram and photographs submitted by the appellant in the course of adjudication, the Ld. Commissioner has observed that goods in question have been used to channelize sulphuric acid in the manufacturing process. The process helps restore coating inside the steel channels forming part of the machines to keep the machine in running condition. In essence, the goods on which credit has been denied have been used in the factory for repair and maintenance purpose which facts are not in dispute. The appellant is legally eligible for credit and hence, the instant demand cannot be sustained - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat Credit on lead and related articles under chapter 78
- Eligibility of credit on disputed items as 'capital goods' or 'input'
- Contention on repair and maintenance usage of goods
- Legal precedent from Hon'ble Rajasthan High Court and Tribunal judgments

Analysis:
1. The appeal involved the disallowance of Cenvat Credit on lead and related articles by the Ld. Commissioner, Central Excise, Kolkata, for the period April 2005 to January 2010. The appellant, engaged in manufacturing Viscose Rayon Filament Yarn, contested the denial of credit on the grounds that the goods were used for repair and maintenance of steel channels for the manufacturing process. The disputed items were classified as 'capital goods' or 'input' necessary for upkeep and operation of machinery.

2. The appellant argued that the goods in question were essential for the maintenance of steel channels used to channelize sulphuric acid in the manufacturing process. The Ld. Commissioner acknowledged the usage of these goods for repair and maintenance, noting their role in keeping the machinery operational. The appellant relied on the decision of the Hon'ble Rajasthan High Court in UOI vs. Hindustan Zinc Ltd., highlighting the eligibility of goods used for upkeep and maintenance as 'capital goods' for availing credit.

3. The Tribunal considered the legal precedent set by the Hon'ble Rajasthan High Court and Tribunal judgments in similar cases. Referring to the decision in UOI v. Hindustan Zinc Ltd., the Tribunal held that goods necessary for the upkeep and maintenance of machinery directly involved in manufacturing processes qualify as 'capital goods' eligible for credit. The Tribunal also cited the case of Asst. Comm, C. Excise, Visakhapatnam vs. GMR Industries Ltd, where the eligibility of credit on various items for repair and maintenance was upheld based on High Court rulings.

4. Following the legal principles established in the cited judgments, the Tribunal concluded that the appellant was legally entitled to avail credit on the disputed items. The Tribunal dismissed the appeal of the Revenue, upholding the appellant's contention that the goods in question were integral for the smooth operation and maintenance of machinery. Consequently, the demand for Central Excise duty, interest, and penalty was not sustainable, and the appeal was allowed in favor of the appellant with consequential relief as per law.