2023 (9) TMI 517 - AT - Central Excise

Recovery of CENVAT credit taken on capital goods installed / laid in the Marine Terminal Facility (MTF) area - denial on account of no interlinking of the manufacturing process of the factory and jetty (MTF) - HELD THAT - In the appellant s own case M/S. CHEMPLAST SANMAR LTD. VERSUS COMMISSIONER, GST AND CENTRAL EXCISE, PUDUCHERRY 2018 (4) TMI 1224 - CESTAT CHENNAI , the very same issue was considered and it was held that the appellant have put up jetty and connected facilities in the sea near Karaikal Port only to facilitate the receipt and transfer of their essential raw materials ethylene to bring it to the factory for further manufacture. Apparently, such handling and receipt of essential raw materials is to be considered as part of integral manufacturing process. The demand cannot sustain and requires to be set aside - Appeal allowed.

Summary

Issues:
The issue in this case revolves around the eligibility of CENVAT credit on capital goods installed in the Marine Terminal Facility (MTF) area, with the main contention being whether the MTF is an integral part of the manufacturing process of the factory.

Comprehensive Details:
The appellants, engaged in the manufacture of Polyvinyl Chloride Resin, availed CENVAT credit on duty paid on inputs, capital goods, and service tax paid on input services. The dispute arose when Show Cause Notices were issued to recover CENVAT credit taken on capital goods in the MTF area, alleging a lack of interlinking between the manufacturing process of the factory and the jetty in the MTF. The original authority and Commissioner (Appeals) upheld the demand, interest, and penalties, leading to the appeals.

The appellant argued that the MTF, which includes facilities for receiving goods from ships and transferring them to the storage facility on shore, is essential for the manufacturing process. The appellant highlighted permissions obtained and approvals received, emphasizing the necessity of the MTF for the factory's functionality. Referring to previous tribunal decisions in their favor, the appellant contended that the MTF and its capital goods are integral to the manufacturing process, enabling the receipt of essential raw materials.

On the other hand, the department argued that the MTF does not fall under the definition of a factory as per the Central Excise Act, being physically distant from the shore. The department relied on a previous tribunal decision and contended that the MTF's distance from the shore distinguishes this case from precedents cited by the appellant.

After hearing both sides, the tribunal referred to previous decisions that considered similar disputes and held that denial of credit on capital goods in the MTF was not legally sustainable. Citing principles related to integral processes in manufacturing, the tribunal concluded that the MTF and its capital goods are eligible for credit. The impugned orders were set aside, and the appeals were allowed with consequential relief, if any, in accordance with the law.

By following judicial discipline and precedent, the tribunal found in favor of the appellant, setting aside the demand for CENVAT credit on capital goods in the MTF area. The decision emphasized the integral role of the MTF in the manufacturing process, ultimately allowing the appeals with consequential relief as per the law.