Cenvat credit on printing machines used in manufacturing activities.

PJ/CASE LAW/2015-16/2646

Case:-PRICOL LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE

Citation:- 2014 (303) E.L.T. 573 (Tri. - Chennai)

Brief Facts:- The brief facts of the case are that the appellant is a manufacturer of speedometers. During the period 1999-2000 they also got six screen printing machines which they further manufactured by adding motors, gear boxes, bearings, V-belts, chains etc. to make it electrically operated. One of the finally manufactured machine was cleared on payment of excise duty, three such machines were cleared under Notification No. 108/95-C.E. and two machines were captively consumed within the factory.

Appellants Contention:-The learned counsel for the appellant submits that the eligibility for credit is clearly laid down under Rule 57B of Central Excise Rules, 1944, as it existed at the relevant time. The situation under consideration is covered by Rule 57B(2) of the said Rule which is reproduced below :-
“The manufacturer of the final products shall not be allowed to take credit of the duty paid on the following goods, namely :-
(i)        machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Rule 57Q (other than those used as component parts in the manufacture of final products), used for any purpose in the factory;
(ii)        packing materials in respect of which any exemption to the extent of the duty of excise payable on the cost of the packing materials is being availed of for packing any final products;
(iii)       packing materials or containers, the cost of which is not included in the value of the final products under section 4 of the Act; and
(iv)       crates and glass bottles used for aerated water.”

It is very clear that Cenvat credit could not be availed under Rule 57A as input on goods like machines, machinery, equipment etc. covered under Rule 57Q. But there was an exception in the said clause that if such machines, machinery, equipment were to be used as components or parts in the manufacture of final products, Cenvat credit could be availed considering the goods as inputs. The learned counsel submits that they had used screen printing machines bought by them as input for further manufacture of electrically operated screen printing machine and therefore Cenvat credit should be allowed. He also drew out attention to the purchase order which is reproduced :-
ANNEXURE TO OUR PURCHASE ORDER NO. ME 012173 DATED 22-3-1999 (sic)

ANNEXURE-I

FABRICATION, ASSEMBLY AND SUPPLY OF SCREEN PRINTING MACHINE - SP 400 AS PER OUR DRAWING/SPECIFICATION WITH ALL RAW MATERIAL FASTENERS AND PAINTING (IVORY COLOUR AS PER STANDARDS) BUT WITHOUT GEAR BOX, MOTOR BEARINGS, ELECTRICAL, ‘V’ BELT, CHAIN AND CASTOR WHEELS - 1 SET

ANNEXURE-II

FABRICATION, ASSEMBLY AND SUPPLY OF VACUUM TABLE FOR SCREEN PRINTING MACHINE - SP 400 WITH ALL MATERIALS, SOLENOID VALVE AND SURFACE TREATMENT AS PER OUR DRAWING/SPECIFICATION BUT WITHOUT VACUUM PUMP/MOTOR - 1 SET

Respondents Contention:-Opposing the prayer, the learned AR submits that once the goods were classified as machines capable of performing an independent function of screen printing it could no longer be considered as an input. The purchase order shows that the equipment brought into the factory was capable of performing independent function and therefore by no stretch of imagination this could be considered as input. He also submits that Rule 57B(2) is not applicable because the goods brought in were not parts but complete machines.

Reasoning of Judgement:- Considered submission of both sides. Tribunal note that goods which are final products in the hands of one person can be an input in the hands of another person who is further processing the goods by another manufacturing process. The Section Note 6 of Section XVI clearly lays down that process of the type done by the appellant amounts to manufacture. In view of this position, tribunal do not find any merit in the argument of Revenue. Hence the orders of the lower authorities are set aside and the appeal is allowed.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that goods which are final products in the hands of one person can be input in the hands of another person who is further processing the goods. Consequently, the contention that the cenvat credit on printing machines was not admissible as it was complete and independent machine capable of operation without being processed further was held as untenable. It is not necessary that for availing cenvat credit, input should be part/component and not complete machine.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2646

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