2023 (4) TMI 1130 - AT - Central Excise

CENVAT Credit - inputs or capital goods - Electrode Carbon Paste(ECS) - HELD THAT - The issue is no more res integra and has been long settled by slew of decisions passed by various authorities. The fact of use of the said goods and its ultimate consumption in the manufacture of finished goods is not disputed. The electrode carbon paste (ECP) owing to its capability to conduct electricity is essential for the manufacture of the ferro alloys and in the process gets consumed, even being a part of the finished goods. Therefore, it is certainly in the nature of a consumable. The Tribunal in the case of COMMISSIONER OF C. EX., BHAVNAGAR VERSUS UNIFRAX INDIA LTD. 2009 (1) TMI 694 - CESTAT, AHMEDABAD taking note of its earlier decision and thereby allowed CENVAT Credit on electrode assembly and needles. The Hon ble Calcutta High Court in the case of SINGH ALLOYS STEEL LTD. VERSUS ASSISTANT COLLECTOR OF CENTRAL EXCISE 1993 (1) TMI 97 - CALCUTTA HIGH COURT had held that the definition of input was not dependent upon what ought to be used but what is in fact used. Relying on this decision the Tribunal in the case of INDUSTRIAL CHEMICALS MONOMERS LTD. VERSUS COLLR. OF C. EX., MADURAI 1995 (6) TMI 184 - CEGAT, NEW DELHI had held that carbon paste used in the manufacture of calcium carbide either as a technical necessity or otherwise was entitled to benefit of notification 201/79-CE dated 4.6.79, thereby rejecting the plea of mere incidental consumption of carbon paste in the course of manufacture. Applying the ratio of the aforesaid judicial pronouncement to the facts herein, there is no question of denying that electrode carbon paste is in the nature of a consumable as it gets consumed during the process of manufacture of ferro alloys. The electrode carbon paste, therefore, cannot be held to be capital goods in terms of Rule 2 (a) of the Cenvat Credit Rules, 2004. Thus, electrode carbon paste used and consumed in the process of manufacture of ferro alloys is an input eligible for cenvat credit under Rule 2 (k) of the Cenvat Credit Rules, 2004 - there are no infirmity in the appellant having availed credit on the said product as input. Accordingly, the demand of interest cannot be sustained. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are whether "Electrode Carbon Paste (ECS)" used in the furnace for manufacturing ferro alloys should be considered as a consumable input eligible for cenvat credit under Rule 2 (k) of the Cenvat Credit Rules, 2004, or as capital goods under Rule 2 (a) of the same rules.

Summary:

Issue 1: Nature of Electrode Carbon Paste (ECS) - Consumable or Capital Goods

The appellant, a manufacturer of ferro alloys, contended that ECS is a consumable item that gets consumed during the manufacturing process and should be considered as an input eligible for cenvat credit. On the other hand, the Revenue argued that ECS should be classified as capital goods, limiting the cenvat credit to 50% in each financial year.

The Adjudicating Authority partially disallowed the cenvat credit taken by the appellant, imposing penalties and interest for alleged improper availment. The Commissioner (Appeals) upheld the demand for interest but set aside the penalty.

Issue 2: Legal Precedents and Interpretations

The Tribunal referred to various decisions, including Commissioner of Central Excise, Bhavnagar Vs. Unifrax India Ltd., emphasizing that consumable items essential for manufacturing finished goods should be treated as inputs eligible for cenvat credit. The Tribunal also cited the decision of the Hon'ble Calcutta High Court in Singh Alloys and Steel Ltd. Vs. Asstt. Collector, highlighting that the definition of input depends on actual usage rather than intended usage.

Additionally, the Tribunal mentioned the decision in the case of Industrial Chemicals & Monomers Ltd., Vs. CCE, Madurai, and Commissioner of Central Excise & Service Tax, Bolpur Vs. Maithon Alloys Ltd., supporting the classification of carbon paste as a consumable.

Issue 3: Conclusion and Decision

After considering the arguments and legal precedents, the Tribunal concluded that ECS, being consumed in the manufacturing process of ferro alloys, qualifies as a consumable input under Rule 2 (k) of the Cenvat Credit Rules, 2004. The Tribunal found no infirmity in the appellant availing cenvat credit on ECS as an input and set aside the demand for interest.

The impugned order of the Commissioner (Appeals) was overturned, and the appeal was allowed with any consequential relief.

This summary provides a detailed overview of the judgment, including the arguments presented, legal precedents cited, and the final decision reached by the Tribunal regarding the classification of Electrode Carbon Paste (ECS) for cenvat credit purposes.