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2017 (6) TMI 156 - AT - Central ExciseCENVAT credit - Natural Air - input or capital goods - whether the imported Molecular Sieve and activated Alumina would be treated as capital goods as held by the Adjudicating Authority or input as claimed by the Revenue? - Held that - Molecular Sieve is a chemical item and is used for purification of Air-Plant. It is used for absorbing Carbon-Di-Oxide and water (moisture) from the Air being processed in the manufacture of Oxygen. There are several decisions of judicial authorities where the various chemicals were treated as inputs under the Modvat/Cenvat Scheme. The Tribunal in the case of Commissioner of Central Excise, Indore v. Flex Chemicals Pvt.Ltd. 2001 (4) TMI 720 - CEGAT, NEW DELHI observed that the Modvat Credit on inputs cannot be denied on the ground that the assessee has claimed as capital goods - the Molecular Sieve is an input as held by the Adjudicating Authority. But the Cenvat Credit cannot be denied as it was claimed as capital goods. Credit allowed - appeal dismissed - decided against Revenue.
Issues:
1. Whether the imported Molecular Sieve and activated Alumina are to be treated as capital goods or inputs. 2. Validity of the Review order of the Revenue. 3. Disallowance of Cenvat Credit by the Adjudicating Authority. Analysis: Issue 1: The main issue in this case is whether the imported Molecular Sieve and activated Alumina should be classified as capital goods or inputs. The Adjudicating Authority considered the use of Molecular Sieve in the Air Separation Units (ASU) for producing moisture-free air, concluding it as an input. The Commissioner(Appeals) upheld this view, noting the repeated regeneration and long lifespan of the Molecular Sieve. Various judicial decisions were cited to support the classification of similar chemical substances as inputs. The Tribunal concurred with the Adjudicating Authority's classification of Molecular Sieve as an input, emphasizing that Cenvat Credit cannot be denied even if wrongly claimed as capital goods. Issue 2: The validity of the Review order of the Revenue was challenged on the grounds of a defect in the signature date by one of the Members of the Committee of Commissioners. However, the Tribunal found the Review order to be proper, signed by both Commissioners, and containing the necessary date. The preliminary objection raised by the respondent's counsel was dismissed. Issue 3: The Adjudicating Authority disallowed the Cenvat Credit claimed by the respondents, leading to the Revenue filing an appeal. The Commissioner(Appeals) set aside the Adjudication order, prompting the Revenue to challenge this decision. The Tribunal, after considering the facts and arguments from both sides, disposed of the appeal, affirming the classification of Molecular Sieve as an input and allowing the Cenvat Credit based on judicial precedents and the nature of the substance's use in the manufacturing process. In conclusion, the Tribunal upheld the classification of Molecular Sieve as an input, emphasizing the importance of judicial decisions and the nature of the substance's role in the manufacturing process. The Review order of the Revenue was deemed valid, and the appeal was disposed of with observations in favor of the respondents regarding the Cenvat Credit.
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