Manufacturer of Final Product is Entitled to Take Credit of Excise Duty on Capital Goods received in Factory for Production of Final Product: CESTAT [Read Order]

The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the manufacturer of final products was entitled to take credit of excise duty on capital goods received in the factory for the production of final products. 

Hindustan Zinc Ltd, the respondent-assessee was engaged in the manufacture of Zinc ingots, lead, etc. falling under Chapter 79 to the Central Excise Tariff Act, 1985, and CENVAT credit was availed on various inputs, capital goods, and input services in terms of the provisions of the CENVAT Credit Rules, 2004. 

The revenue appealed against the order passed by the Commissioner (Appeals) for quashing the entire demand in favour of the assessee. 

O P Bisht, the counsel for the revenue contended that the CENVAT credit WAS not admissible to the assessee, as they were not the manufacturers of the final product Tail Gas Treatment plant (TGT), as the contractor viz., Thermax Ltd. was the actual manufacturer. 

It was further submitted that the TGT plant manufactured at the site was exempted from payment of duty, hence no credit was admissible on inputs/capital goods used in the manufacture of the TGT plant. 

Sukriti Das, the counsel for the assessee contended that the assessee had availed CENVAT credit correctly as the goods have been used within the factory of Production, and all conditions under the CENVAT Credit Rules had been satisfied. 

Further submitted that according to rule 3(1) of the CENVAT Credit Rules entitled a manufacturer of the final product to take credit of excise duty “paid on any input or capital goods received in the factory of production of the final product”. 

Also contended that the ownership of goods was irrelevant to decide the admissibility of credit and the factum of receipt of capital goods in the factory of the respondent had not been disputed in the appeal. 

The bench observed that the prerequisite for availing of CENVAT credit in respect of capital goods in the factory of the manufacturer was its receipt in the factory and use in the manufacture of a dutiable final product. 

The two-member bench comprising Dilip Gupta (President) and Hemambika R Priya (Technical) held that the assessee was entitled to take the credit of excise duty of the final products while dismissing the appeal filed by the revenue. 

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