2010 (3) TMI 514 - AT - Central Excise

Cenvat/Modvat - The raw materials have to be stored first and then it is to be used in manufacturing process so the storage system maintained by the respondent is nothing but indirectly involved in the process of manufacturing of the final product. Held that- storing the material by the respondent is an integral part of the activity of manufacture. Hence cenvat credit cannot be denied.

Summary

Issues: Alleged wrongful availment of Cenvat Credit on storage system.

In this case, the main issue revolves around the wrongful availment of Cenvat Credit on a storage system by the respondent. The Revenue alleged that the respondent wrongly availed Cenvat Credit on the storage system, amounting to Rs. 12,934. The Revenue argued that the storage system is not a storage tank and therefore, the respondent is not entitled to take Cenvat credit on it as it is not used directly or indirectly in the manufacturing process of the final product and does not qualify as a capital good.

Upon hearing the arguments, the Member (J) examined the case and noted that the revenue involved was less than Rs. 50,000. Both lower authorities had previously dropped the demand against the respondent, ruling that the storage system was used for storing raw materials, which are not directly used in the manufacturing of the final product upon receipt in the factory. The Member (J) observed that raw materials need to be stored before being used in the manufacturing process, making the storage system indirectly involved in the manufacturing process. This view was supported by the decision in Solaris Chemtech, where the Supreme Court held that the process in question is an integral part of the manufacturing activity, justifying the allowance of Cenvat credit.

Furthermore, the Member (J) referenced the case of Banco Products (India) Ltd. v. CCE, which held that items like plastic crates used for storing raw materials are considered capital goods or inputs. Considering that the storage system in question was used for storing raw materials, the Member (J) concluded that it was an integral part of the manufacturing activity and directly or indirectly involved in the manufacturing process. Therefore, the denial of Cenvat credit was deemed unjustified, and the appeal by the Revenue was rejected.