2014 (3) TMI 784 - AT - Central Excise

Cenvat Credit - Classification - Inputs or capital goods - 100% credit at once - whether Lithographic Plates and Thermostar are to be treated as inputs or capital goods - Held that - what was input prior to introduction of definition of capital goods and Modvat credit for capital goods does not become capital goods once the definition of capital goods is given and credit is made available for capital goods also. Further, I take note of the fact that as and when a printing order is received, the printer has to take a plate, expose and develops the material on that plate and then proceed to print the matter. That being the position, the Lithographic plate, chemical etc. used for printing would all become inputs for the offset printing process and we cannot say that Lithographic plate alone would not be input just because the same can be used repeatedly. Just like other inputs, the Lithographic plate also is relevant only for a particular job which the printer undertakes and the job may be repetitive but the fact remains that the plate cannot be used for any other purpose. Moreover, the printers charges for cost of Lithographic plate, exposure and development cost used by them separately. In any case, the cost of the Lithographic plate exposed and developed is recovered from the person for whom offset printing job is undertaken. All these factors would go to show that a Lithographic plate used by the appellant is an input for a particular offset printing job and that may be repetitive but cannot be said that like a capital goods Lithographic plate is used repeatedly. - Therefore, Lithographic plate cannot be considered as capital goods - Decided in favour of assessee.

Summary

Issues:
1. Classification of Lithographic Plates and Thermostar as inputs or capital goods.

Analysis:
The issue before the Appellate Tribunal was to determine whether Lithographic Plates and Thermostar should be treated as inputs or capital goods. The appellant, engaged in Offset printing, had claimed 100% credit on these items, which the Revenue contended were capital goods, demanding repayment with interest and imposing a penalty.

The appellant's Chartered Accountant argued that the lower authorities had classified Lithographic plates under Chapter 8442 as capital goods, but the Tribunal had previously classified them under CH 37.05, not under 84.42. The Chartered Accountant emphasized that the nature of the items received by the appellant should be considered, and reclassification of inputs or capital goods at the receiver's end was not valid. The definition of capital goods specifies certain chapter headings, but not all products under Chapter 84 need to be treated as capital goods.

The Tribunal found merit in the Chartered Accountant's argument that Lithographic plates should not be considered capital goods. Once exposed and developed, these plates could only be used for printing the specific material they were exposed to, limiting their utility. The decision in the case of M/s. Indian Aluminium Co. Ltd. was cited, where silver halide films were treated as eligible inputs, supporting the argument that items used for a specific purpose should not automatically be classified as capital goods. The Tribunal also noted that the cost of Lithographic plates was recovered separately for each printing job, indicating their nature as inputs specific to a particular task.

In conclusion, the Tribunal ruled that Lithographic plates were inputs for offset printing jobs, even if they could be used repeatedly for the same material. The repetitive use did not transform them into capital goods, as they were essential for the printing process but not usable for other purposes. Therefore, the appeal was allowed in favor of the appellant.

This detailed analysis of the judgment highlights the considerations made by the Tribunal in determining the classification of Lithographic Plates and Thermostar as inputs rather than capital goods in the context of the Offset printing process.