The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai has held that Capital Goods installed in the Marine Terminal Facility (MTF) area are an integral part of the Manufacturing process and thus eligible for CENVAT (Central Value Added Tax) Credit.
The decision came in response to the Excise Appeal filed by M/s. Chemplast Sanmar Ltd. against the Commissioner of Goods and Services Tax (GST) & Central Excise.
The appellant company is involved in the production of Polyvinyl Chloride Resin, which had an MTF that facilitated the receipt of essential raw materials, such as Vinyl Chloride Monomer, from ships.
The appellant had availed CENVAT Credit for the Capital Goods installed in the MTF area, a decision that was initially challenged by the tax authorities.
The dispute revolved around whether the MTF, located in the sea near Karaikal Port, could be considered an integral part of the manufacturing process.
The appellant, represented by Smt. Radhika Chandrasekar argued that the Marine Terminal Facility (MTF) was an integral part of their manufacturing process, essential for receiving raw materials, making it eligible for CENVAT credit.
The respondent revenue, represented by Shri Rudra Pratap Singh contended that the MTF did not meet the criteria of a “Factory” as defined under Section 2(e) of the Central Excise Act, 1944, as it was not physically connected to the shore and was situated several kilometers away.
The bench highlighted the critical role played by the MTF in receiving and transferring essential raw materials to the factory, making it an indispensable part of the manufacturing process.
The bench referenced a similar case of Reliance Industries Ltd. wherein the Bombay High Court held that facilities like single point mooring systems and connected equipment, essential for receiving raw materials, were eligible for credit as capital goods. In the appellant’s case, the MTF served a similar purpose by facilitating the unloading of liquid cargo, which was a crucial raw material for manufacturing.
The bench also referred to the principle established by the Supreme Court in Jayaswal Neco Ltd. and J.K. Cotton Spinning and Weaving Mills Co. Ltd., which emphasised the importance of processes integral to manufacturing and the goods required for those processes.
Furthermore, the bench cited the case of Finolex Industries Ltd. Vs. Commissioner of Central Excise, Pune, which concluded that a jetty, like the one in the present case, should be considered part of the premises and fall under the definition of “Factory” as per the Central Excise Act, 1944.
The bench stressed that the activities and facilities closely linked to the manufacturing process are eligible for tax benefits and credits.
In result, the two-member bench comprising Ms. Sulekha Beevi C.S (Judicial Member) and Shri Vasa Seshagiri Rao Kumar (Technical Member) concluded that the denial of credit for capital goods in the MTF area was legally unsustainable and hence the orders were set aside and the appeals were allowed with consequential relief, if any, as per the law.
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