2018 (2) TMI 213 - AT - Central Excise

CENVAT credit - whether the appellant is eligible for credit on the pipelines laid outside the factory which is issued for drawing water from Cauvery river? - Held that - The issue stands covered in the case of Pepsico India Holdings Ltd. 2000 (10) TMI 122 - CEGAT, CHENNAI , where it was held that the pipline can be considered in the factory in this case, it would be covered by the definition of the word factory under Section 2(e) of the Central Excise Act, 1944, and credit is allowed - denial of credit is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of cenvat credit on pipelines located outside the factory for drawing water under an expansion project.

Analysis:
The appellants, engaged in iron and steel manufacturing, availed cenvat credit on pipelines for drawing water from Metturdam under an expansion project. The issue was whether credit on such pipelines located outside the factory was admissible. The original authority confirmed demand and penalties, leading to the appeal. The appellant argued that the pipelines were essential for manufacturing activities, citing precedents like CCE Chennai Vs Pepsico India Holdings Ltd. The department contended that credit was not eligible for goods used outside the factory, referencing Madras Cements Ltd. Vs CCE Chennai. The Tribunal considered the definition of 'factory' under the Central Excise Act and previous rulings. It found in favor of the appellant, stating the pipelines were an extension of factory pipelines, thus eligible for credit.

The Tribunal referred to decisions in cases like J.K. Udaipur Udyog Ltd. v. CCE, Jaipur-II and CCE, Chennai v. Pepsico India Holding Ltd., emphasizing that the location of pipelines outside the factory was immaterial if used for manufacturing within the factory premises. This aligned with the principle that capital goods used indirectly for manufacturing, even outside the factory, were credit eligible. The Tribunal distinguished the case of Madras Cements Ltd., noting it pertained to a different issue regarding captive mines. Citing Birla Corporation Ltd. Vs CCE, the Tribunal further supported the eligibility of credit for goods used outside the factory but for manufacturing purposes. Ultimately, following precedents like Pepsico India Holding and Jaypee Bela Plant, the Tribunal deemed the denial of credit unjustified and allowed the appeal with consequential relief as per law.