2009 (5) TMI 190 - AT - Central Excise

Credit has been disallowed to the appellants who are manufacturers of industrial and medical gases on (i) Cryogenic thermosiphonic cold converter (ii) Repair Kit (iii) Nuts - (iv) Monal (specialized alloy) (v) Vacuum Pump Oil (vi) Aluminium Bronze and (vii) Indicator, on the ground that these are not covered by the definition of Capital Goods under Rule 57Q(1) of the Central Excise Rules, 1944. - Cryogenic thermosiphonic cold converter which is a specialized storage container used in the manufacture of gaseous oxygen/nitrogen etc. - contention of the appellants that the Cryogenic thermosiphonic cold converter is an accessory to the Reciprocating pump falling under Chapter 84 and hence covered by S.No. 5 of the Table to Rule 57Q as it stood during the relevant period is to be accepted. We, therefore, hold that the credit is admissible on this item. - Credit is also admissible on Indicator which is an instrument providing information regarding liquid oxygen available in the cryogenic converter - we hold that credit is not admissible for the reason that Nuts are generic in nature with no specific application answering the description of capital goods or spares, Monal and Aluminium Bronze which are claimed to be specialized alloys have not been shown to have any nexus with the manufacture of the assessee s final products. Repair Kit also has no role to play in the manufacture of final products and, therefore, credit is not admissible on this item.

Summary

Issues:
Admissibility of credit on various items under the definition of "Capital Goods" | Demand of duty on excess amount collected from customers | Inclusion of freight charges in assessable value for duty calculation

Admissibility of Credit on Various Items:
The appellants, manufacturers of industrial and medical gases, had credit disallowed on several items, including Cryogenic thermosiphonic cold converter, Repair Kit, Nuts, Monal (specialized alloy), Vacuum Pump Oil, Aluminium Bronze, and Indicator. The Tribunal analyzed the necessity of these items in the manufacturing process. The Cryogenic thermosiphonic cold converter was deemed essential for the functioning of the Reciprocating pump, crucial in the gas manufacturing process. The Tribunal accepted the credit on the Cryogenic thermosiphonic cold converter and Indicator, recognizing their indispensable role in the manufacturing process. However, credit was denied on Nuts, Monal, Aluminium Bronze, and Repair Kit as they were not shown to be directly linked to the manufacturing process.

Demand of Duty on Excess Amount Collected:
A demand of duty was confirmed on the excess amount collected by the appellants from customers on sales through their depots. The Tribunal upheld this demand, attributing the difference in value at the factory gate and the higher value at the depot to non-inclusion of freight charges in the assessable value. It was clarified that freight charges for clearances beyond the place of removal could be deducted, but charges for clearance from factory to depot needed to be included. The Tribunal also upheld the application of the extended period of limitation for confirming this demand and allowed the levy of interest as per statutory provisions.

Conclusion:
The Tribunal partially allowed Appeal No. E/429/2002 filed by the assessees by accepting credit on specific items while fully allowing Appeal No. E/286/2002 filed by the Revenue. The judgment highlighted the importance of analyzing the direct connection of items to the manufacturing process for determining the admissibility of credit. Additionally, it emphasized the correct calculation of duty by including relevant charges in the assessable value. The decision provided clarity on the interpretation of rules and regulations concerning credit eligibility and duty calculation in excise matters.