2009 (7) TMI 1123 - Commissioner - Central Excise

Summary

Issues:
Appeal against denial of Cenvat credit on capital goods used for reclaiming sand for manufacturing excisable goods.

Detailed Analysis:

1. Issue of Denial of Cenvat Credit: The appellant appealed against the denial of Cenvat credit on capital goods used for reclaiming sand, arguing that the reclaimed sand was further used in manufacturing resin coated sand, which is an excisable commodity. The Joint Commissioner held that since resin coated sand was not manufactured within the appellant's premises, the credit availed on the sand reclamation plant was not admissible. The appellant contended that the reclaimed sand was an intermediate product and cited various case laws to support their claim.

2. Legal Precedents: The judgment referred to several legal precedents where Cenvat credit was allowed on capital goods used in the production of non-excisable commodities that were further used in the manufacturing of dutiable products. These precedents highlighted that the critical factor was whether the intermediate product was eventually utilized in the production of excisable goods, irrespective of where the final manufacturing took place.

3. Decision and Rationale: After reviewing the case records and arguments, the Commissioner concluded that the appellant was entitled to avail Cenvat credit on the sand reclamation plant and related components. The Commissioner emphasized that the reclaimed sand, being an intermediate product, qualified for the credit, especially considering its eventual use in the production of resin coated sand, a dutiable product. The Commissioner criticized the Joint Commissioner's decision as erroneous and highlighted that denying the credit would undermine the concept of job work recognized in Central Excise laws.

4. Penalty Imposition: The Commissioner also addressed the issue of the arbitrary imposition of an equal penalty by the Joint Commissioner. It was noted that the penalty was incorrectly imposed under the wrong rule, within the normal limitation period, without proper justification, and in a situation where the appellant succeeded on the merits of the case. The Commissioner deemed the penalty imposition unsustainable and set aside the impugned order, providing consequential relief to the appellant.

In conclusion, the judgment favored the appellant, allowing the Cenvat credit on the capital goods used for reclaiming sand and rejecting the imposition of an equal penalty. The decision was based on legal precedents, the interpretation of Central Excise laws, and the fundamental principle that credit should be allowed when capital goods contribute to the production of dutiable goods, regardless of the location of the final manufacturing process.