2014 (2) TMI 453 - AT - Central Excise

Denial of CENVAT Credit - Duty paid on laptop - Revenue issued a Show Cause Notice alleging that the said laptop was not either part of any machine or linked with the production process - Bar of limitation - Held that - admittedly, during the period when the credit was availed, the machines were not in a position to work without laptop. Merely because the laptop is a movable item and can be shifted to another place cannot be a reason to hold that the same would not fall within the definition of capital goods. The laptop falls within Chapter 84 of the Customs/Central Excise Tariff and as per the definition of capital goods in terms of Rule 2(a)(A) of CENVAT Credit Rules, goods falling under Chapter 84 are to be treated as capital goods. There is nothing in the definition to assert that if the capital goods are movable, they would not be considered as capital goods. Demand is hopelessly barred by the limitation. Commissioner (Appeals) has observed that the Show Cause Notice was issued within a period of one year from the date of audit objections raised and as such is within the limitation period. I observe that the above finding of the Commissioner (Appeals) is not correct in as much as the relevant date as specified under the law does not start from the date of audit objection. Adopting the said date as the relevant date, for the purposes of limitation, would amount to rewrite the law. Admittedly, the appellants have availed the credit in the statutory records and the same was reflected in the returns/declarations filed by them. As such, no mala fide can be attributed to them, the issue being a genuine issue of interpretation of law - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat credit for duty paid on a laptop used in manufacturing aluminium extrusions under Chapter Heading 7604 of the Central Excise Tariff Act, 1985.

Analysis:
1. The dispute revolved around the denial of Cenvat credit amounting to Rs.28,280/- for duty paid on a laptop used by the appellants in controlling machines for manufacturing aluminium extrusions. The Revenue alleged that the laptop was not part of any machine or linked with the production process, leading to the issuance of a Show Cause Notice. The adjudicating authority denied the credit on the grounds that the laptop was movable and not considered capital goods, a decision upheld by the Commissioner (Appeals).

2. The appellants argued that the laptop was an integral part of the manufacturing process, specifically the Aluminium Press, and was essential for its operation. They presented evidence from the supplier of the machine, highlighting the laptop's importance and functionality in running the manufacturing machine. They contended that the laptop fell within Chapter 84 of the Customs/ Central Excise Tariff Schedule, making it eligible for consideration as capital goods under Rule 2(a)(A) of the CENVAT Credit Rules.

3. The appellate tribunal examined the lower authorities' decision and found that while the laptop was imported separately from the machine, it was indispensable for the machines to function during the period in question. The tribunal emphasized that the mobility of the laptop should not preclude its classification as a capital good, especially since it fell under Chapter 84 of the Tariff Schedule. The tribunal noted that the machines operated through special software installed on the laptop, which had become a necessity due to technological advancements.

4. Additionally, the tribunal addressed the issue of limitation, ruling that the demand for denying Cenvat credit was time-barred. The Commissioner (Appeals) had based the limitation period on the date of audit objections raised, which the tribunal deemed incorrect. The tribunal held that the relevant date for limitation did not start from the audit objection date but from the actual availing of credit by the appellants, which was duly recorded in statutory records and returns.

5. Ultimately, the tribunal set aside the impugned orders on both merit and limitation grounds, allowing the appeal and granting consequential relief to the appellants. The judgment, delivered by Mrs. Archana Wadhwa, highlighted the importance of considering the functionality and necessity of items like laptops in modern manufacturing processes, emphasizing their eligibility as capital goods under relevant statutory rules.