2009 (12) TMI 272 - AT - Central Excise

Cenvat Credit- The respondent is a manufacturer of rough forgings and forging articles of steel falling under Chapter 7326 of CETA 1985. They also availed Cenvat credit of inputs and capital goods. The dispute relates to metal band saw blades and steel shots as to whether they can be considered as capital goods as contended by the Department or can be treated as inputs as claimed by the respondent. The original authority after taking note of the duration of use of these items and the purpose for which they were used held that they were capital goods and therefore only 50% of the credit was available during the financial year in which materials were received and the balance of 50% was available only during the next financial year. Held that- The Commissioner (Appeals) has clearly held that the same are in the nature of consumable used in relation to manufacture of final products and therefore appropriately to be treated as inputs. No valid grounds have been adduced to interfere with the finding of the Commissioner (Appeals) which is based on appreciation of the factual matrix in the said case. In view of the above the appeal is rejected. Cross-Objection which is merely in support of the order of the Commissioner (Appeals) is also disposed of.

Summary

Issues:
Dispute over classification of 'metal band saw blades' and 'steel shots' as capital goods or inputs for availing Cenvat credit.

Analysis:
1. The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute between the Department and a manufacturer regarding the classification of 'metal band saw blades' and 'steel shots' for availing Cenvat credit under Chapter 7326 of CETA, 1985. The Department contended that these items should be considered as capital goods, while the manufacturer claimed they should be treated as inputs.

2. The original authority had initially held that the disputed items were capital goods, allowing only 50% credit in the year of receipt and the remaining 50% in the subsequent financial year. This decision was based on the duration and purpose of use of the items. Consequently, the original authority demanded interest and imposed a penalty. However, the Commissioner (Appeals) disagreed and classified the items as inputs, setting aside the demand for interest.

3. During the hearing, the learned Joint Commissioner of the Department argued that 'metal band saw blades' and 'steel shots' should be considered capital goods as they are essential for the functioning of other capital goods. However, upon reviewing the submissions and records, the Tribunal found that the items were being separately used with capital goods and fulfilled the definition of inputs under the Cenvat Credit Rules, 2004.

4. The Commissioner (Appeals) also highlighted that under the Cenvat Credit Rules, the term 'input' encompassed all goods used in or in relation to the manufacture of final products. Therefore, based on the definition of inputs, the items in question were appropriately classified as inputs, justifying the credit taken by the manufacturer at the time of receipt of the goods.

5. The Tribunal emphasized that the classification of an item as an input or capital goods is relative and context-specific. Drawing an analogy, it explained how certain goods could serve as inputs at one stage of production and capital goods at another. Considering the role and period of usage documented by the original authority, the Tribunal upheld the Commissioner (Appeals)' decision that the disputed items were inputs used as consumables in the manufacturing process.

6. Ultimately, the Tribunal rejected the appeal by the Department, affirming the classification of 'metal band saw blades' and 'steel shots' as inputs. The Cross-Objection, which supported the Commissioner (Appeals)' order, was also disposed of accordingly. The Tribunal found no valid grounds to interfere with the factual findings and reasoning of the Commissioner (Appeals) in this case.