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2025 (2) TMI 181 - HC - Central ExciseCENVAT Credit on capital goods - gas plant located at Duliajan belonging to the appellant which supplies gas for manufacturing polymers at Lepetkata forms part of the manufacturing unit at Lepetkata so as to enable appellant to claim Cenvat Credit on capital goods installed at Duliajan or not - HELD THAT - The present case is not a case of transportation of final product but transfer of raw material to the main unit by an ancillary unit for the purpose of manufacturing the final product. The substantial question of law framed in this excise appeal is required to be answered in the affirmative and it is accordingly held that the appellant Company is entitled to avail CENVAT Credit on capital goods (both domestic and imported) installed at Duliajan Unit. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The primary legal question considered in this judgment was whether the gas plant located at Duliajan, which supplies gas for manufacturing polymers at Lepetkata, forms part of the manufacturing unit at Lepetkata, thereby enabling the appellant to claim CENVAT Credit on capital goods installed at Duliajan. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The case revolves around the interpretation of the CENVAT Credit Rules and whether the Duliajan Unit can be considered part of the manufacturing unit at Lepetkata for the purpose of availing CENVAT Credit on capital goods. The appellant relied on various precedents, including decisions from the Supreme Court and the Madras High Court, which addressed similar issues regarding the treatment of ancillary units as part of the main manufacturing unit. Court's interpretation and reasoning: The Court examined the relationship between the Duliajan Unit and the Lepetkata Unit, noting that the Duliajan Unit is a captive plant supplying essential raw material (compressed and dehydrated gas) to the Lepetkata Unit, where the final product is manufactured. The Court found that the Duliajan Unit is integral to the manufacturing process at Lepetkata and should be treated as part of the manufacturing unit for the purpose of CENVAT Credit. Key evidence and findings: The Court noted that the Duliajan Unit does not manufacture any final product but supplies necessary raw material exclusively to the Lepetkata Unit. The Revenue did not dispute that the final product could not be manufactured without the gas supplied by the Duliajan Unit. The Court also referred to the Madras High Court's decision in Habasit Iakoka (P) Ltd., which supported the notion that ancillary units supplying raw material to a main manufacturing unit can be considered part of the manufacturing unit for CENVAT Credit purposes. Application of law to facts: The Court applied the principles established in previous cases and the relevant legal framework to conclude that the Duliajan Unit, being a captive plant supplying essential raw material to the Lepetkata Unit, should be considered part of the manufacturing unit. Therefore, the appellant is entitled to avail CENVAT Credit on capital goods installed at the Duliajan Unit. Treatment of competing arguments: The Revenue argued that the Duliajan Unit, being located 48 km away from the Lepetkata Unit and not producing any final product, should not be eligible for CENVAT Credit. The Revenue relied on a Circular dated 16.10.2008, which stated that CENVAT Credit is only available for inputs/capital goods used in registered premises where actual manufacturing takes place. The Court found this reliance misplaced as the Circular pertained to CNG manufacturers and situations where the final product is transported to other stations, which was not the case here. Conclusions: The Court concluded that the appellant is entitled to CENVAT Credit on capital goods installed at the Duliajan Unit, as it is an integral part of the manufacturing process at the Lepetkata Unit. SIGNIFICANT HOLDINGS The Court held that the Duliajan Unit, despite being located separately, forms part of the manufacturing unit at Lepetkata due to its role in supplying essential raw material for the production of the final product. The Court emphasized that the relationship between the units and the manufacturing process should determine eligibility for CENVAT Credit, rather than mere geographical separation. Core principles established: The judgment reinforced the principle that ancillary units supplying critical raw materials to a main manufacturing unit can be considered part of the manufacturing unit for the purposes of availing CENVAT Credit. The Court also highlighted the importance of examining the functional integration between units rather than focusing solely on their physical locations. Final determinations on each issue: The Court answered the substantial question of law in the affirmative, allowing the appellant to claim CENVAT Credit on capital goods installed at the Duliajan Unit. The appeal was disposed of with no order as to costs.
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