2008 (6) TMI 400 - AT - Central Excise

Stay/Dispensation of pre-deposit - Cenvat/Modvat - capital goods - inputs - Held that - matter referred to Larger Bench to decide Whether the term capital goods can include plant, structures ebedded to earth?, Whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as inputs in relation to their final products as inputs for capital goods, or none of the above? and Whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant?

Summary

Issues:
1. Admissibility of Cenvat credit on steel construction materials and oxygen gas used in manufacturing processes.
2. Interpretation of the term "capital goods" under the Cenvat scheme.
3. Whether items like angles, joists, beams, channels, bars, flats used in construction work can be considered as inputs or capital goods.
4. Reference to Larger Bench on questions related to the inclusion of plant and structures embedded to earth as capital goods, treatment of construction materials as inputs, and allowance of credit for goods used in fabrication of structures and plant.

Issue 1: Admissibility of Cenvat credit on steel construction materials and oxygen gas:
The appellant, a manufacturer of goods, used duty paid items like steel construction materials and oxygen gas in their manufacturing processes. The original authority ordered recovery of wrongly availed credit, interest, and imposed a penalty. The advocate argued for a liberal interpretation of the term "capital goods" citing precedent decisions, seeking waiver of dues.

Issue 2: Interpretation of the term "capital goods" under the Cenvat scheme:
The advocate contended that the definition of capital goods should be viewed liberally, encompassing goods from specific chapters and their components. The Department argued against extending the term to include construction of plants, stating that credit on items like steel and cement used in immovable structures is not eligible.

Issue 3: Classification of construction materials as inputs or capital goods:
The Tribunal found that the steel items used in construction work were not part of machinery or equipment, permanently embedded to the earth, and could not be considered goods or capital goods. The Tribunal observed that the appellant had inconsistently treated these items as inputs or capital goods, indicating they may not qualify as inputs for the final products.

Issue 4: Reference to Larger Bench for clarifications on capital goods and inputs:
Due to conflicting views with a previous Tribunal decision, the matter was referred to a Larger Bench for clarification on whether plant and structures embedded to earth can be considered capital goods, whether construction materials can be treated as inputs, and if credit can be allowed for goods used in fabrication of structures and plant. Pre-deposit of duty and penalty was dispensed with pending the Larger Bench decision.

This judgment highlights the complexities surrounding the admissibility of Cenvat credit on construction materials, the interpretation of capital goods under the Cenvat scheme, and the need for clarity on the treatment of items used in construction processes. The reference to a Larger Bench underscores the significance of resolving these issues to provide consistency and guidance in similar cases.