2024 (3) TMI 911 - AT - Central Excise

CENVAT Credit - denial of credit on the ground that the appellant has incorrectly considered the electrodes as inputs and availed full credit whereas they are capital goods, in respect of which only 50% of CENVAT Credit is available in the year of receipt as per the CENVAT Credit Rules, 2004 - HELD THAT - Circular No. B22/51/86-TRU dated 21.10.1986 clarified the position that It is only for the purposes of Notes 1 to 4, Section XVI that the word 'machine' (used in Notes) refers to any machine, machinery, plant, equipment, apparatus or appliance mentioned in the heading of Chapter 84 or 85. Otherwise, the whole phrase machine, machinery, plant, equipment, apparatus, etc. would have to be used wherever the word machine is used in the Notes. As carbon electrode is essential for manufacture of aluminum, it should be eligible for Modvat credit, as it would satisfy the criterion of input. Also, the issue whether electrodes can be treated as input for availment of CENVAT Credit or capital goods came before the Tribunal in the case of THE COMMISSIONER OF GST CENTRAL EXCISE VERSUS M/S. CHEMFAB ALKALIES LTD. 2023 (7) TMI 947 - CESTAT CHENNAI wherein the Tribunal observed The Tribunal in the case of COLLECTOR OF C. EX. VERSUS METTUR CHEMICALS INDUSTRIALS 1990 (12) TMI 243 - CEGAT, MADRAS held that cathodes used in the electrolytic process being incidentally consumed in the manufacture of caustic soda is an input as defined under erstwhile Rule 57A of Central Excise Rules, 1944 and eligible for modvat credit. As the issue is no longer res integra in view of the clarifications issued by the C.B.E.C. by way of Circulars from time to time and the decision in the case of M/s. Chemfab Alkalies Limited, it is held that on all the items which have been used by the appellant in the process of manufacture of their final product, the appellant is entitled to avail CENVAT Credit, as inputs. There are no merit in the impugned orders and accordingly, the same are set aside - appeals filed by the appellant are allowed.

Summary

Issues Involved:
The judgment involves the issue of availment of CENVAT Credit on electrodes used in the manufacture of Aluminium and whether they qualify as inputs or capital goods under the CENVAT Credit Rules, 2004.

Facts of the Case:
The appellant, engaged in the manufacture of electrodes of Aluminium and carbon electrodes paste, availed CENVAT Credit on various materials used in the manufacturing process. The appellant procured materials like Pre-baked Anode, Cathode Carbon Block, Ceramic Fibre Blanket Cera, Aluminium Pipes and Tubes, among others, and claimed CENVAT Credit on them as inputs for their Aluminium manufacturing business. The appellant did not claim depreciation on these consumable items as they needed to be procured regularly for the manufacturing process.

Contentions and Adjudication:
The appellant was issued Show Cause Notices proposing to deny CENVAT Credit on electrodes, alleging they were incorrectly considered as inputs and full credit was availed when they should be treated as capital goods. The appellant contended that electrodes used in the electrolytic processes were inputs and fulfilled the criteria mentioned in the CENVAT Credit Rules. The adjudicating authority confirmed the demands, denying CENVAT Credit, leading the appellant to appeal.

Legal Clarifications and Precedents:
The Circulars issued by the Board clarified that carbon electrodes are considered inputs, which are binding on the Department. The Tribunal's previous decision in a similar case also supported the view that electrodes used in the manufacturing process are inputs. The issue of electrodes being treated as inputs for CENVAT Credit had been settled in previous cases where electrodes were deemed eligible for credit as inputs.

Judgment:
The Tribunal, considering the Circulars and previous decisions, held that all items used by the appellant in the manufacturing process of their final product were eligible for CENVAT Credit as inputs. The impugned orders denying CENVAT Credit were set aside, and the appeals filed by the appellant were allowed.

This comprehensive summary highlights the key aspects of the legal judgment regarding the availment of CENVAT Credit on electrodes and the determination of whether they qualify as inputs or capital goods under the CENVAT Credit Rules, 2004.