2025 (1) TMI 220 - AT - Central Excise

CENVAT credit on capital goods initially brought into Plant No.1 and subsequently moved to Plant No.2 and Plant No.3 - HELD THAT - It is noted that the contention of Revenue is that capital goods were brought into Plant No.1 which is also referred to as Unit No.1 and after availing cenvat credit, they were utilized into Plant No.2 and 3 which were also referred to as Unit No.2 and 3 and during the relevant time those units were not part of the Central Excise registered premises and, therefore, there was proposal for denying cenvat credit which was confirmed by the original authority. It is noted that through the communication dated 24.06.2016, Principal Commissioner of Central Excise having jurisdiction over all the three plants has allowed them to be treated as part of the existing Central Excise registration No. AABCM9380KXM001. Thus, different units stated in the present proceedings are part of the same manufacturing unit and, therefore, there is no case of capital goods being removed out of the manufacturing unit after availing cenvat credit. Conclusion - Different units stated in the present proceedings are part of the same manufacturing unit and, therefore, there is no case of capital goods being removed out of the manufacturing unit after availing CENVAT credit. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellant was eligible to avail CENVAT credit on capital goods initially brought into Plant No.1 and subsequently moved to Plant No.2 and Plant No.3.
• Whether the movement of capital goods to Plant No.2 and Plant No.3, which were not registered under the Central Excise Act at the time of credit availing, constituted a removal out of the manufacturing unit, thereby invalidating the CENVAT credit.
• Whether the subsequent permission for single registration for all three plants retrospectively validates the CENVAT credit availed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility to Avail CENVAT Credit

• Relevant legal framework and precedents: The CENVAT Credit Rules and the Central Excise Act, 1944, govern the eligibility for availing CENVAT credit. The appellant relied on a precedent from the Hon'ble Madras High Court in the case of CCE, Coimbatore vs. Habasit Lakota (P) Ltd.
• Court's interpretation and reasoning: The court considered the fact that the appellant's three plants were part of the same manufacturing unit, as evidenced by the subsequent approval for single registration.
• Key evidence and findings: The appellant provided a letter from the Assistant Commissioner, Central Excise, confirming the single registration for all three plants.
• Application of law to facts: The court applied the principle that if all units are part of a single manufacturing entity, the movement of goods within these units does not constitute removal out of the manufacturing unit.
• Treatment of competing arguments: The Revenue's argument that the units were separate at the time of credit availing was countered by the subsequent single registration approval, which indicated that they were part of the same entity.
• Conclusions: The court concluded that the appellant was eligible to avail the CENVAT credit as the plants were part of the same manufacturing unit.

Issue 2: Movement of Capital Goods and Registration Status

• Relevant legal framework and precedents: The Central Excise Act, 1944, requires registration of premises for availing and utilizing CENVAT credit.
• Court's interpretation and reasoning: The court interpreted the subsequent single registration as a confirmation that the plants were not separate entities.
• Key evidence and findings: The communication from the Principal Commissioner of Central Excise allowing single registration was pivotal.
• Application of law to facts: The court found that the movement of capital goods did not breach the registration requirements as all units were retrospectively considered part of a single entity.
• Treatment of competing arguments: The appellant's argument that the units were operationally integrated was accepted over the Revenue's contention of separate registration requirements.
• Conclusions: The movement of capital goods did not invalidate the CENVAT credit, as the plants were treated as a single registered unit.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "We, therefore, hold that different units stated in the present proceedings are part of the same manufacturing unit and, therefore, there is no case of capital goods being removed out of the manufacturing unit after availing CENVAT credit."
• Core principles established: The judgment establishes that subsequent integration of manufacturing units under a single registration can validate CENVAT credit retrospectively, provided the units are operationally integrated.
• Final determinations on each issue: The court set aside the impugned order, allowing the appeal and confirming the appellant's eligibility for CENVAT credit on the capital goods in question.

The court's decision underscores the importance of understanding the operational integration of manufacturing units and the impact of registration status on CENVAT credit eligibility. The judgment provides clarity on how subsequent administrative approvals can affect past transactions under the Central Excise framework.