CENVAT Credit of Excise Duty allowable on Railway line Outside the Factory which Exclusively used for Handling of Material used in Manufacture of Final Products: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the CENVAT credit of excise duty allowable on the railway line was outside the factory and exclusively used for handling of materials used in the manufacture of final products. 

Nayara Energy Limited, the appellant assessee was an integrated huge petroleum plant engaged in the manufacture of Motor spirits; High-Speed Diesel; Furnace Oil; Pet Coke; Superior Kerosene; LPG; etc. Welding Electrodes, Filler Wires, and Wire Fillers were used for the repair and maintenance of the plant and machinery. 

The assessee appealed against the order passed by the Commissioner of Central Excise for denying the CENVAT credit on the welding Electrodes, Wire FLR, Filler Wires, Welding Wire, and Wire Rope. 

Ramnath Prabhu and Dimple Gohil, the counsels for the assessee contended that the welding machine was classifiable under Central Excise Tariff and since welding electrodes are part of the welding machine, the same would be covered by Rule 2 (a)(iii) of CENVAT Credit Rules, 2004. 

Further submitted that the railway track used to move inputs, raw materials, and manufactured goods within factory premises and the Track cannot be kept out of the consideration for availing CENVAT credit as it was being used directly for manufacture. 

Kalpesh P. Shah, the counsel for the department relied on the decisions made by the lower authorities and contended that the goods used by the assessee can neither be classified as Component, Spares, or Accessories of the Plant nor machinery used in the manufacture of final products and denied the CENVAT credit on the material used in laying of Rail Lines on the ground that such Rail Line was situated outside the factory premises, therefore, credit cannot be extended. 

The Bench observed that the railway line material was used to move inputs/ raw material and manufactured goods within the factory premises and the movement of goods through the railway track was directly connected to the manufacture of the final product, therefore, the CENVAT credit cannot be denied on these items. 

The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) quashed the denial of CENVAT credit availed by the assessee and held that the assessee was entitled to get the CENVAT credit while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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