2013 (11) TMI 874 - AT - Central Excise

Cenvat credit taken on partly finished screen printing machine Machines cleared under Notification No.108/95 Held that - The goods which are final products in the hands of one person can be an input in the hands of another person who is further processing the goods by another manufacturing process - The Section Note 6 of Section XVI clearly lays down that process of the type done by the appellant amounts to manufacture Order set aside Decided in favour of Assessee.

Summary

Issues:
1. CENVAT credit eligibility on partly finished screen printing machines.
2. Interpretation of Rule 57B of Central Excise Rules, 1944.
3. Classification of goods as inputs or final products.

Issue 1: CENVAT Credit Eligibility

The appellant, a manufacturer of speedometers, acquired screen printing machines in 1999-2000, which were further processed by adding components to make them electrically operated. The Revenue contended that CENVAT credit could not be claimed on these partly finished machines. The appellant argued that Rule 57B of the Central Excise Rules, 1944, allowed credit if the goods were used as components in manufacturing final products. The purchase order indicated the machines were utilized as inputs for manufacturing electrically operated machines. The Tribunal noted that goods considered final products by one entity could serve as inputs for another engaged in further processing, constituting manufacturing under Section Note 6 of Section XVI. Therefore, the Tribunal ruled in favor of the appellant, allowing the appeal.

Issue 2: Interpretation of Rule 57B

The dispute revolved around the interpretation of Rule 57B of the Central Excise Rules, 1944. The appellant relied on Rule 57B(2), which prohibits credit on certain goods unless used as components in final product manufacturing. The appellant argued that the screen printing machines were indeed used as inputs for electrically operated machines, making them eligible for CENVAT credit. The Revenue contended that the machines, capable of independent function, could not be considered inputs. The Tribunal analyzed the purchase order, which specified the machines were used in further manufacturing processes. Ultimately, the Tribunal found no merit in the Revenue's argument and set aside the lower authorities' orders.

Issue 3: Classification of Goods

A key aspect of the case was the classification of the acquired machines as inputs or final products. The Revenue asserted that once goods were capable of independent function, they could not be deemed inputs. However, the appellant demonstrated through the purchase order that the machines were intended for further processing and not as standalone final products. The Tribunal emphasized that goods considered final products by one entity could function as inputs for another entity involved in additional manufacturing processes. This perspective, supported by Section Note 6 of Section XVI, led the Tribunal to reject the Revenue's argument and allow the appellant's appeal.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's reasoning leading to the final decision in favor of the appellant.