Whether capital goods credit admissible on wagons falling under Tariff Heading 86?

PJ/Case Law/2013-14/1985

Case:- BULK CEMENT CORPORATION (INDIA) LTD. Vs COMMR. OF C. EX., BELAPUR

Citation:- 2013 (294) E.L.T. 433 (Tri. - Mumbai)

Brief facts:- Applicant filed this application for waiver of pre-deposit of duty of Rs. 1,09,36,128/-, interest and penalty of Rs. 10,00,000/-. The demand was confirmed after denying the credit in respect of wagons as capital goods. The brief facts of the case applicants were receiving duty paid cement in bulk from M/s. ACC Ltd. and the same was packed into bags and sold to the customer. The activity of repacking amounted to manufacture as per the provisions of Section 2(f) of the Central Excise Act. The applicant purchased duty paid wagons and availed the credit as capital goods. The Revenue denied the credit on the ground that the wagons were classifiable under Chapter 86 of the Central Excise Tariff, which was not covered under the definition of capital goods under the provisions of Rule 2(a) of Cenvat Credit Rules, 2004 and so were denied the credit.

Appellant’s contentions:- The contention of applicant was that wagons were used for procurement of raw material therefore the same was material handling equipment. Hence, the credit could not be denied on the ground that the same were not specified goods as per the provisions of Cenvat Credit Rules.

Respondent’s contentions:- Revenue relied upon the provisions of Cenvat Credit Rules and submitted that same could not be considered as capital goods or parts accessories of the specified capital goods. Hence, the demand was rightly made.

Reasons of judgment:- The Bench found that the applicant’s claimed credit on the wagons classifiable under Chapter 86 of the Central Excise Tariff as capital goods. For ready reference, the provisions of Rule 2(a) of Cenvat Credit Rules, 2004 were reproduced as below:-

“3. As per Rule 2(a) of Cenvat Credit Rules, 2004 “capital goods” means
(A) the following goods namely -
(i)     all goods falling under chapter 82, chapter 84, chapter 85, chapter 90 (heading 6805 grinding wheels and the like and parts thereof falling under chapter 6804) of the First Schedule of the Excise Tariff Act.
(ii)    pollution control equipments
(iii) components, spares and accessories of the goods specified at (i) and (ii).
(iv)   moulds and dies, jigs and fixtures
(v)    refractories and refractory materials.
(vi)   tubes and pipes and fittings thereof and storage tanks used (1) in the factory of the manufacturer of the final product but does not include any equipment or appliance used in an office or (2) for providing output service
(vii) motor vehicles registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zp), (zzp), (zzt) and (zzw) of clause (105) of Section 65 of the Finance Act.”
There was no dispute that the wagons were classifiable under Chapter 86 of the Central Excise Tariff and the same was not covered under the definition of capital goods. Further, the Bench found that the wagons could not be considered as components, spares and accessories of the specified goods. In view of this, they found that the applicant had not made out a case for waiver of duty as no financial hardship was pleaded during the arguments. Taking into facts and circumstances of the case and the interest of Revenue as provided under Section 35 of the Central Excise Act, the applicants were directed to deposit whole of the duty amount i.e. Rs. 1,09,36,128/- within a period of eight weeks. On deposit of the above mentioned amount, the pre-deposit of interest and penalties were waived for hearing of the appeal. Compliance was to be reported on 31-5-2012.

Decision:- Stay application partly allowed.

Comment:-The analogy drawn from the case is that the wagons are classifiable under Chapter 86 of the Central Excise Tariff Act and so the same is not covered under the definition of capital goods. Further the wagons could not be considered as components, spares and accessories of the capital goods. Hence, primarily credit could not be availed on wagons.

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PJ/Case Law/2013-14/1985

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