2010 (1) TMI 370 - AT - Service Tax

Cenvat Credit- respondent had availed credit on capital goods viz. washing equipment/machines amounting to Rs. 73, 073.00 and Rs. 55, 030.00 which were used for washing of employees uniforms. It is contended that the activity of washing uniforms of the employees is not related to the process of manufacture of the final product and the credit availed by the assessee is said to be irregular. The Deputy Commissioner by order in original decide the matter in favour of assessee Commissioner (Appeals) uphold the order in original. Held that- the respondent is satisfying both the condition for the requirement of eligibility to avail Cenvat credit on the excise duty paid on capital goods and also the fact that the said washing machines are required to comply with the mandatory requirement of providing clean uniform under the Drugs & Cosmetics Act and Rules made there under The appeal filed by the Revenue is rejected.

Summary

Issues: Eligibility of Cenvat Credit on capital goods used for washing employees' uniforms.

Analysis:
1. Issue of Eligibility of Cenvat Credit: The appeal pertains to the eligibility of Cenvat Credit on capital goods, specifically industrial washing machines used for cleaning employees' uniforms. The Revenue contended that the activity of washing uniforms is not related to the manufacturing process, thus the credit availed was irregular. The Deputy Commissioner initially allowed the credit, leading to an appeal by the Revenue. The Commissioner (Appeals) upheld the Order-in-Original, stating that the washing machines were indeed capital goods as per Rule 2(a) of the Cenvat Credit Rules, 2004.

2. Contentions of the Parties: The Revenue argued that the washing machines did not contribute to the manufacturing process and cited precedents to support their claim that such capital goods are ineligible for Cenvat Credit. On the other hand, the respondent argued that the machines fell within the definition of capital goods and were essential for providing clean uniforms, as mandated by the Drugs & Cosmetics Act. They referenced previous cases to support their stance on the issue.

3. Decision and Reasoning: The Member (J) analyzed the submissions and records, finding that the washing machines used by the respondent qualified as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004. The machines were essential for maintaining clean uniforms in compliance with legal requirements. The judgment highlighted the importance of meeting mandatory standards under the Drugs & Cosmetics Act. Consequently, the Commissioner (Appeals)'s decision was upheld, and the appeal by the Revenue was rejected. The judgment emphasized the adherence to legal definitions and requirements in determining the eligibility of Cenvat Credit on capital goods.

In conclusion, the judgment affirmed the eligibility of Cenvat Credit on industrial washing machines used for cleaning employees' uniforms, emphasizing compliance with legal standards and the definition of capital goods under relevant rules.