2016 (3) TMI 67 - AT - Central Excise

Modvat credit disallowed - Held that - Chlorine containers are duty paid and used in the manufacture of final product. The Tribunal consistently viewed that, the Chlorine containers are eligible for CENVAT credit. The dispute relates to the value of the Chlorine containers was not included in the assessable value. But, there is no material available on record that any proceeding was initiated against the appellant for non-inclusion of the value of the chlorine containers in the assessable value, and therefore, the credit cannot be denied on such reasons. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of modvat credit on Chlorine containers under Rule 57A of the Central Excise Rules, 1944.
2. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.
3. Interpretation of the definition of input under Rule 57A in relation to containers used for packing products.
4. Admissibility of CENVAT credit on Chlorine containers used as storage tanks.
5. Determination of whether Chlorine containers are essential components of plant and machinery for the manufacturing process.

Analysis:
1. The appellants were involved in manufacturing Caustic Soda and Chlorine, and a Show Cause Notice was issued alleging improper availing of modvat credit on Chlorine containers. The Adjudicating Authority disallowed the credit under Rule 57A and imposed a penalty, which was upheld by the Commissioner (Appeals).

2. The issue revolved around whether the Chlorine containers used for packing the final product could be considered as inputs under Rule 57A. The Revenue argued that the containers were not included in the assessable value, making them ineligible for credit. However, previous Tribunal decisions and case law supported the view that such containers are eligible for credit.

3. The Tribunal referred to past cases where the use of Chlorine containers for storage and transportation was deemed eligible for Modvat credit. The Tribunal emphasized that the containers were duty paid and directly used in the manufacturing process, making them admissible for credit.

4. The Tribunal highlighted that the dispute over the value of Chlorine containers not being included in the assessable value did not warrant denial of credit, especially since there were no prior proceedings against the appellant for this reason. Therefore, the credit could not be denied solely based on this ground.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal filed by the appellant. The decision was based on the consistent view that Chlorine containers are eligible for CENVAT credit and that the lack of evidence regarding non-inclusion of container value in the assessable value precluded the denial of credit.