2009 (10) TMI 306 - AT - Central Excise

Cenvat credit- The appellants herein are manufacturers of cotton yarn exigible to duty under Chapter 52 of First Schedule to Central Excise Tariff Act, 1985. Revenue disallowed the capital goods credit for the items Ring Frame on the ground that Ring Frame was purchased on hire-purchase agreement before 17-6-94, which is the date on which Rule 57R of the Central Excise Rules, 1944 was amended so as to permit availment of capital goods credit in respect of machinery purchased on lease. In respect of other goods, he held that they were not specified as capital goods under Rule 57Q of CER. The Commissioner (Appeals) upheld the order of the lower authority against whose order the assessee has come up in appeal before us. Held that- As regards spares for OMA 121600 AACS, self adhesive tapes and joint adhesive, listed at S. Nos. 5 to 7 of the table set out herein above, the appellants have not been able to satisfy us that these fall within the definition of capital goods during the relevant period. We, therefore, disallow credit of Rs. 4,165/- on these items. In the result, the appeal is partly allowed as above.

Summary

Issues: Determination of admissibility of capital goods credit for various items under the Central Excise Tariff Act, 1985.

Analysis:
1. Ring Frame: The Commissioner disallowed the capital goods credit for the Ring Frame on the basis that it was purchased on a hire-purchase agreement before the relevant amendment to Rule 57R. However, the appellants demonstrated that they purchased the Ring Frame outright from a specific entity, even though they took a loan and hypothecated the same. The ownership of the Ring Frame was established to vest with the appellants, making them eligible for the credit amounting to Rs. 1,93,979.

2. Calendering Machine, Craft Mounting Equipment, Base Cylinder Grinder, and Linkerin Machine: These items were challenged for their eligibility as capital goods under Rule 57Q of the Central Excise Rules. The appellants successfully argued that these machines were essential for the production process of cotton yarn, falling within the definition of capital goods as per Rule 57Q. The machines were found to be used in producing or processing goods, making them eligible for the capital goods credit.

3. Spares for OMA 121600 AACS, Self Adhesive Tapes, and Joint Adhesive: The appellants failed to prove that these items qualified as capital goods during the relevant period. As a result, the credit for these items, totaling Rs. 4,165, was disallowed by the Tribunal.

4. Overall Decision: The Tribunal partially allowed the appeal, granting capital goods credit for the Ring Frame, Calendering Machine, Craft Mounting Equipment, Base Cylinder Grinder, and Linkerin Machine. However, the credit for the spares and adhesive items was disallowed. The decision was made after a thorough assessment of each item's relevance to the manufacturing process and the applicable rules under the Central Excise Tariff Act, 1985.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the admissibility of capital goods credit for the various items in question.