2008 (4) TMI 60 - AT - Central Excise

Credit of duty paid on various goods (panels, structures, angles, bars, plates etc) used in setting up a paint shop paint shop in question falls u/ch 8479.10 - credit denied on ground that impugned goods falling under Chapter headings 72 and 73 were not covered by the definition of capital goods as per Rule 2(b) of Cenvat Credit Rules credit not deniable because as per sub-rule 2(b)(iii), spares, components and accessories of the goods covered by Chapter 84 are also capital goods

Summary

Issues:
1. Denial of credit of duty paid on goods used in setting up a paint shop.
2. Classification of goods under different chapter headings.
3. Interpretation of Cenvat Credit Rules, 2002 regarding capital goods.
4. Applicability of input credit provisions for parts used in manufacturing capital goods.

Analysis:
1. The appeal was filed against the order of the Commissioner (Appeals) who vacated the original authority's decision denying credit of duty paid on goods used in setting up a paint shop. The Revenue argued that the goods used in the paint shop fell under Chapter Heading 8479.10, while credit was denied based on the classification of the goods under Chapter headings 72 or 73. The issue was whether these goods qualified as 'capital goods' under Rule 2(b) of Cenvat Credit Rules, 2002.

2. Both parties agreed that the paint shop, constructed using the disputed goods, was classified under Chapter Heading 8479.19. However, the Cenvat Credit Rules consider goods falling under Chapter 84 as capital goods. Sub-rule 2(b)(iii) of the rules also includes spares, components, and accessories of goods under Chapter 84 as capital goods. The Tribunal affirmed the lower appellate authority's decision that the disputed goods were parts, components, and accessories of machines under Chapter 84, thus qualifying as capital goods.

3. The Tribunal highlighted that the impugned order was in line with the law as provisions allowed for input credit on parts used in manufacturing capital goods. Referring to Note 5 of Section XVI, the paint shop was classified as a plant, falling under Chapter 84 as capital goods. Had the respondents claimed duty credit on the inputs for fabricating the paint shop, the credit could not have been denied. Consequently, the appeal by the Revenue was dismissed for lacking merit.

In conclusion, the Tribunal upheld the lower appellate authority's decision, emphasizing the classification of goods under Chapter 84 as capital goods and the availability of input credit for parts used in manufacturing capital goods.