2016 (8) TMI 492 - AT - Central Excise

Cenvat credit - A.C. corrugated sheets, HR SS sheet - violation of the provisions of Rule 2 and 3 of CCR s - Held that - it is found that HR SS plates have been used in the fabrication of storage tank of Ethyl Acetate. Further storage tank is a specified capital goods under Rule 2(a)(A)(vii) and as such the same is eligible for Cenvat credit. So far as AC corrugated sheet is concerned it is found that the same have been used in the boiler, without the use of which there can be no generation of steam in the boiler which is essential for manufacture of excisable products. Accordingly, the Cenvat credit is allowable on the A.C. Corrugated Sheets also. Penalty levied is also set aside. - Decided in favour of assessee

Summary

Issues:
- Denial of Cenvat credit on AC corrugated sheets used for bagasse handling system and HR SS plate for fabrication of storage tank of Ethyl Acetate in a chemical plant.

Analysis:
1. The appellant, a manufacturer of sugar and molasses, appealed against the denial of Cenvat credit on AC corrugated sheets and HR SS plates. The Revenue objected to the credit, citing a violation of CCR rules. The Order-in-Original confirmed the demand and imposed penalties. The appeal before the Commissioner (Appeals) partially upheld the disallowance of credit, leading to the current appeal before the Tribunal.

2. The appellant argued that HR SS plates are essential raw materials for capital goods based on previous Tribunal decisions and High Court rulings. The plates were used for fabricating the storage tank of Ethyl Acetate, making them eligible for credit. Regarding AC corrugated sheets, they were crucial components of the bagasse handling system in the boiler, necessary for steam generation and product manufacturing. The appellant cited legal precedents supporting the eligibility of such items as capital goods.

3. The Tribunal analyzed the usage of HR SS plates in the storage tank and AC corrugated sheets in the boiler system. It found that both items were integral to the manufacturing process and fell under the definition of capital goods eligible for Cenvat credit. Consequently, the Tribunal allowed the appeal, setting aside the denial of credit on AC corrugated sheets and HR SS plates. The appellant was granted Cenvat credit on the disputed items, and the penalties imposed were also revoked.