2017 (10) TMI 340 - AT - Central Excise

CENVAT credit - HDPE pipes - case of Revenue is that these HDPE pipes were only optional requirement and are not essential for the functioning of the goods manufactured - Held that - the HDPE pipes are supplied along with the FO integrated system and the excise duty is also paid on the same. Further, in the absence of HDPE pipes, the final product of the appellant is not functional - If the definition of input is analyzed as contained in rule 2(k) which include accessories of the final product cleared along with the final product, it is found that the HDPE pipes are accessories of the final products and is always cleared along with the final product as is reflected in the invoices produced by the appellant. In the case of CCE vs. Insulation Electrical (P) Ltd. 2008 (3) TMI 22 - Supreme court , the Hon ble Supreme Court has held that the difference between the accessories and parts is that accessory is something supplementary or subordinate in nature and need not be essential for the actual functioning of the product, whereas part is an essential component of the whole without which the whole system cannot function. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Identification of essential components for availing CENVAT credit under CCR, 2004.

Detailed Analysis:

Issue 1: Identification of essential components for availing CENVAT credit under CCR, 2004
The appellant, engaged in manufacturing excisable goods, availed CENVAT credit for HDPE Pipes used as conduits for cable assemblies. The Departmental officers alleged irregular availment of credit, leading to show cause notices and subsequent demand confirmation, interest imposition, and penalty under CCR. The appellant contended that HDPE pipes were integral to their manufacturing process, constituting a complete system supplied to customers. The appellant argued that HDPE pipes were accessories of the final product, cleared together, and were essential for the functionality of the final product. The definition of "input" under Rule 2(k) of CCR was crucial, encompassing goods used in or in relation to the manufacture of final products, including accessories cleared with the final product. The appellant cited relevant case laws supporting their position, emphasizing the distinction between accessories and essential parts for the functioning of the final product.

Analysis Outcome:
After evaluating submissions and case laws, the Tribunal found that HDPE pipes were integral accessories of the final product, supplied together and subject to excise duty payment. The Tribunal highlighted the inclusive nature of the definition of "input" under CCR, supporting the appellant's claim. Relying on precedents and legal interpretations, the Tribunal concluded that the impugned orders were unsustainable in law. Consequently, the Tribunal set aside the impugned orders, allowing all three appeals of the appellant.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal, providing a comprehensive understanding of the case.