2021 (10) TMI 483 - AT - Central Excise

CENVAT Credit - input services - place of removal - GTA Services - transportation charges for transfer of finished goods/ semi finished goods from appellant unit to the other unit of the same appellant company - installation of special doors for manufacture of drugs under good manufacturing practices - revenue neutrality - HELD THAT - The appellant is entitled to cenvat credit on the doors and windows, which are admittedly essential for manufacture of finished goods of the appellant, by way of goods manufacturing practices. Any input purchased by the manufacturer which are used in the factory for the manufacture of final products, are allowable as inputs, whether it forms part of the finished goods or not. Admittedly, the doors and windows have been used in the factory of the appellant for manufacture of good quality drugs. Accordingly, cenvat credit is allowable on the doors/window. GTA Services - revenue neutrality - HELD THAT - The appellant have demonstrated that they have cleared goods to their sister concern by charging duty on the value of the goods (cost plus, 110% on cost) as per Rule 8 of Central Excise Rules, and such goods have admittedly been received in the other unit. Further, it has been demonstrated in the consignment note, they have mentioned the amount payable towards freight is zero - Admittedly, both the units are under the same company, and the situation is wholly Revenue neutral, as the output duty of the appellant unit at Pithampur, is the input of their Goa unit - the appellant is entitled to cenvat credit of GTA service under Rule 2(l) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit eligibility for transportation charges between units of the same company.
2. Cenvat credit validity for the installation of 'special doors' for drug manufacturing under Good Manufacturing Practices.

Analysis:

Issue 1: Cenvat Credit for Transportation Charges
The appellant, engaged in manufacturing Pharmaceutical Products, faced a show cause notice for various issues, including cenvat credit on outward freight paid for goods cleared to a sister concern. The Adjudicating Authority confirmed the demand for certain issues but dropped it for maintenance charges and non-payment of duty on scrap cleared. The Commissioner (Appeals) upheld the disallowance of cenvat credit for doors and windows and outward freight but remanded the duty short paid allegation back to the Additional Commissioner. The appellant appealed against the upheld demands for cenvat credit on doors and windows and outward freight.

The appellant argued that special doors/windows are essential for maintaining a dust-free environment in the manufacturing premises to ensure the quality of finished goods as per Good Manufacturing Practices (GMP). They cited relevant Board Circulars and precedent rulings to support their claim. Regarding GTA services availed for goods transferred to the sister concern, the appellant provided documentary evidence to demonstrate that the transport charges were incurred as part of the cost of goods. They contended that the extended period of limitation invocation was unjustified and that the issue was interpretational, with no fraudulent intent. The Authorized Representative supported the findings of the impugned order.

The Tribunal held that the appellant was entitled to cenvat credit on doors and windows, essential for manufacturing quality drugs. Additionally, the appellant demonstrated that they cleared goods to the sister concern by charging duty and incurring transport charges, forming part of their cost. As both units were under the same company and the situation was revenue neutral, the appellant was deemed eligible for cenvat credit on GTA services under the Cenvat Credit Rules, 2004.

Issue 2: Cenvat Credit for 'Special Doors' Installation
The Tribunal ruled in favor of the appellant, allowing cenvat credit for the installation of special doors and windows essential for maintaining a dust-free environment in the manufacturing premises to ensure the quality of finished pharmaceutical products. The appellant's argument, supported by relevant circulars and precedent rulings, highlighted the necessity of such infrastructure for compliance with Good Manufacturing Practices (GMP). The Tribunal emphasized that any input used in the factory for manufacturing final products, even if not part of the finished goods, is eligible for cenvat credit. Therefore, the appellant's claim for cenvat credit on the installation of special doors was deemed valid.

In conclusion, the Tribunal allowed the appeal, modifying the impugned order to grant cenvat credit for both the installation of special doors and windows and the outward freight charges incurred for goods cleared to the sister concern.