2014 (9) TMI 680 - AT - Central Excise

Eligibility to CENVAT Credit - Capital goods - Whether weigh bridge (not disputed to be capital goods) purchased and came to the factory of the appellant and used outside the factory for weighing sugar cane shall entitle the appellant to the capital goods credit - Held that - in absence of any contrary evidence neither leaves any scope to doubt the genuineness of the claim nor even use thereof for weighment of sugar cane which is integrally connected to the manufacturing activity. Capital goods came to the factory of the appellant but moved during crushing season for use outside the factory (for weighment of sugar cane) and such weighment is an integral part of the process of sugar industry. There appears no removal of portable weigh bridge from the factory causing loss to revenue. Therefore, any interpretation to deny the capital goods credit under Rule 4 of Central Excise Credit Rules, 2004, shall defeat the spirit of the law. However, it may be appreciated that the definition of capital goods requires that capital goods shall be used in the factory of the manufacture of final product - Decided in favour of assessee.

Summary

Issues:
Whether weigh bridge used outside the factory for weighing sugar cane entitles the appellant to capital goods credit.

Analysis:
The appeal in this case revolves around the question of whether a weigh bridge, acknowledged as capital goods, used outside the factory for weighing sugar cane qualifies the appellant for capital goods credit. Both parties agree on the ownership and authenticity of the weigh bridge; the dispute centers on its location of use. The appellant asserts that the weigh bridge is part of the block of assets, with no depreciation claimed on the relevant capital goods credit. During the sugar crushing season, the weigh bridge is taken outside the factory to weigh sugar cane from farmers, reducing the cost of supply. This activity is deemed essential for the sugar industry's operations.

The factual evidence, unchallenged by contrary proof, supports the genuineness of the claim and the integral connection of the weigh bridge's use to the manufacturing process. Despite the weigh bridge moving from the factory during the crushing season for sugar cane weighment, it remains a capital good integral to the sugar industry's operations. Denying capital goods credit based on the situs of use would go against the law's spirit. The interpretation of capital goods requiring use in the factory of the final product's manufacture should not be narrowly construed to defeat the law's purpose.

Given the unique circumstances of the case and the essential role of the weigh bridge in the manufacturing process, the appeal is allowed, emphasizing that the weigh bridge's temporary use outside the factory during specific operations does not disqualify it from being considered a capital good for credit purposes.