2016 (7) TMI 769 - AT - Central Excise

Cenvat Credit on capital goods - boilers and Water Treatment Plant (WTP) not installed within the factory premises of appellant but in the neighbouring unit - Held that - Undeniably the WTP is an essential part of the manufacturing process undertaken by appellants. Further the definition of factory as contained in Section 2(e) of CEA, 1944 does not anywhere use the word registered premises . Registration of the premises is only a procedure for application of the Act in practice. The WTP in the GAIPL premises is transferred to the appellant by lease agreement and appellant is paying rent. Non-registration of the premises, in which the WTP is situated in the appellant s name or adding it to the appellant s factory premises at the most can only be a procedural lapse, which can be cured. In view thereof, I hold that credit on WTP is admissible. - Credit allowed

Summary

Issues:
1. Irregular availment of CENVAT credit on capital goods.
2. Dispute over the installation location of Water Treatment Plant (WTP).
3. Interpretation of the definition of factory under the Central Excise Act, 1944.

Issue 1: The appellant, engaged in manufacturing sponge iron, faced a show-cause notice for irregular CENVAT credit availment on boilers and WTP. The original authority dropped the demands but imposed a penalty. The department appealed, arguing the WTP was not installed in the appellant's premises. The Commissioner(Appeals) remanded the case for denovo adjudication, allowing credit for WTP installed in a neighbouring unit. The department appealed again, contending ineligibility due to installation outside the factory premises. The Tribunal heard arguments from both sides.

Issue 2: The appellant justified WTP installation at a sister concern's premises due to pollution concerns and space shortage. The interconnected operations between the WTP and Waste Heat Recovery Boiler (WHRB) were crucial for the manufacturing process. The appellant leased the space where WTP was installed and paid rent. The appellant argued for credit eligibility based on the connection between the WTP and their factory's equipment.

Issue 3: The appellant relied on legal interpretations to support credit eligibility for WTP, emphasizing the definition of factory under the Central Excise Act, 1944. The appellant highlighted precedents where credit was allowed for essential equipment located outside the registered premises but integral to the manufacturing process. The Tribunal acknowledged the importance of the WTP in the manufacturing process and directed the appellant to rectify procedural lapses regarding premises registration within a specified timeframe.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs. The judgment emphasized the importance of the interconnected operations and the need for procedural compliance regarding premises registration.