Page 255 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Indirect Tax Laws

Notes 13. More than .....................................items are covered under the new Indian VAT regime out
of which 46 natural and unprocessed local products will be exempt from VAT.
14. The .....................................commodities are listed in the respective schedule with the rates.

15. VAT is not cascading or additive though the ..................................... on the goods sold is
collected at each stage.



Caselet Banco Products (India) Ltd. v. CCEx., Vadodara-I 2009
(235) ELT 636 (Tri-LB)

he appellant was using plastic crates as a material handling device within their
factory premises. Such plastic crates were used for internal transportation of the
Traw material from stores to processing machine, semi-finished goods from one
machine to other machine and finished goods to their storage area. The appellant contended
that the plastic crates were eligible capital goods for the purposes of CENVAT credit and
alternatively as input.
The Tribunal first analyzed the definition of "accessories to the main machine" in order to
decide whether plastic crates got covered in the definition of the capital goods as per rule
2(b) of the erstwhile CENVAT Credit Rules, 2002 [now rule 2(a)(A)(iii) of the CENVAT
Credit Rules, 2004]. After meticulous consideration of various relevant judgments, the
Tribunal observed that the only criteria for an object to be held as an accessory is that a
particular item should be capable of being used with a machine and should advance the
effectiveness of working of that machine.
The plastic crates in question were used for transportation of the raw material to the
processing machine and all the finished goods from the machine to storage area. If instead
of using plastic crates manual transportation of the inputs or semi-finished goods had
been opted for, practically, it would have hampered the continuous working of the machine
on account of delays in the delivery of the raw material/semi-finished goods etc. Hence,
viewed and judged in the light of the interpretation of the term "accessory" by various
Courts, the Tribunal concluded that the plastic crates could be held as accessory. Hence,
plastic crates would be eligible for CENVAT credit as capital goods.

While dealing with the expression "in the manufacture of the goods" in the definition of
inputs under rule 2(g) of the erstwhile CENVAT Credit Rules, 2002 [now rule 2(k) of the
CENVAT Credit Rules, 2004], the Apex Court, in the case of Collr. of C.E. v. M/s. Rajasthan
State Chemical Works 1991 (55) E.L.T. 444, had observed that the said expression
encompassed all processes which were directly related to the actual production. The process
of handling/lifting/pumping/transfer/transportation of the raw material was also a
process in relation to manufacture, if integrally connected with further operation leading
to manufacture of the goods.

By applying the ratio as enacted by the Supreme Court to the issue in dispute, the Tribunal
held that process started with the issuance of the inputs from the stores and their further
transportation to the production platform was only a part of the process of manufacture
integrally related to the final production. In absence of the delivery of the raw material to
the manufacturing platform, the process could not start. Such delivery of the goods included
transportation of the goods by plastic crates. Similarly, finished products were required to

Contd....

250 LOVELY PROFESSIONAL UNIVERSITY