By TIOL News Service

NEW DELHI: AUG 11, 2014 : THE appellants are manufacturers of aluminium extrusions falling under Chapter Heading 7604 of the First Schedule to the Central Excise Tariff Act, 1985. For controlling the machines used in such manufacture they used a laptop on which special software required for managing the functionalities of the machines was installed and the laptop was so used. Revenue issued a Show Cause Notice alleging that the said laptop was not either part of any machine or linked with the production process. After considering the submissions of the appellant, the adjudicating authority denied the Cenvat credit for the reason that the laptop is movable and hence not capital goods. Aggrieved by the said order, the appellant filed appeal with the Commissioner (Appeals) who rejected their appeal.

The appellants have taken a categorical stand that laptop is very important and integral part of the Aluminium Press (2500 Ton Capacity) which works on the basis of the computer and without active involvement of the laptop the aluminium press cannot be operated. This fact is evident from the offer letter and invoice of the supplier, which clearly show that the laptop in question is a tool for funning the manufacturing machine, namely, the aluminium press; that this document also contains information regarding specifications of the laptop as well as of the software required to be used; and that this document is also evident that the laptop is an integral and important part of the manufacturing machine. The appellant has further contested that the laptop falls within Chapter 84 of the Customs / Central Excise Tariff Schedule and as per the definition of 'Capital Goods' in Rule 2 (a) (A) of the CENVAT Credit Rules, the goods falling under Chapter, inter alia , 84 are to be regarded as 'capital goods'

The Tribunal held:

The lower authorities have primarily rejected the CENVAT credit availed by the appellant on the ground that the said laptop was imported separately from the machine and the appellant was working on the very same machine prior to the purchase of laptop. As such, it cannot be concluded that the laptop was a capital goods supplied when the machine itself and as such was an integral part. Admittedly, during the period when the credit was availed, the machines were not in a position to work without laptop. Merely because the laptop is a movable item and can be shifted to another place cannot be a reason to hold that the same would not fall within the definition of capital goods. The laptop falls within Chapter 84 of the Customs/Central Excise Tariff and as per the definition of capital goods in terms of Rule 2(a)(A) of CENVAT Credit Rules, goods falling under Chapter 84 are to be treated as capital goods. There is nothing in the definition to assert that if the capital goods are movable, they would not be considered as capital goods. Admittedly, the machines operate through the special software installed in the laptop, which had become a necessity on account of technology advancement and the fact that prior to the use of laptop, the appellants were using the machines without the said laptop cannot be held to be a factor so as to not to treat the laptop as capital goods. As such, the appellant is entitled to avail the credit of duty paid on the said capital goods.

(See 2014-TIOL-1467-CESTAT-DEL)