2016 (11) TMI 509 - AT - Central Excise

Denial of CENVAT credit - Pipes and the Transmission Assembly - goods are not cenvatable capital goods - whether wrong classification on part of supplier of goods would lead to denial of CENVAT credit? - Held that - reliance placed on the decision of the case of Recon Limited. Vs. Commissioner of Central Excise, Bangalore 2003 (9) TMI 615 - CESTAT, bangalore where it was held that wrong classification on the part of the supplier should not be used to deny the credit otherwise available to the assessee - Transmission Assembly is used in heavy earth moving machinery like dozers and loaders which admittedly fall under chapter 84.29. The transmission assembly used in these items are eligible for Cenvat credit by their own right. The issue that Transmission Assembly used in mines for transmission of the excavated material to the factory has been admittedly held to be Cenvat capital goods. The wrong adoption of classification at the manufacturer s supplier cannot adopted as a reason for denial of credit, otherwise available to the assessee. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit on transmission assembly.
2. Classification of transmission assembly under the Central Excise Tariff Act.
3. Admissibility of credit for capital goods.
4. Impact of wrong classification by the supplier on credit availability.

Analysis:
The appellant, engaged in manufacturing Cement and Clinker, faced a show cause notice proposing to deny Cenvat credit of &8377; 3,17,284/- for Pipes and Transmission Assembly during January to December 2007. While credit on Pipes was allowed, credit of &8377; 3,13,120/- for transmission assembly was denied due to its classification under Chapter 87, not specified for capital goods. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

The appellant argued that the Transmission Assembly, used in mines connected to Cement manufacturing, qualifies as a capital good under Heading 84.83. Despite the supplier's classification under Chapter 87, the duty payment on the goods and their alignment with capital goods definition should allow credit. Citing Tribunal decisions, the appellant contended that wrong supplier classification should not hinder credit availability.

The judicial member analyzed the submissions and the impugned order, determining that the Transmission Assembly used in heavy machinery falls under Chapter 84.29, making it eligible for Cenvat credit. Acknowledging its use in mines for material transmission, the member emphasized that wrong supplier classification should not bar credit rightfully available to the assessee. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.