2017 (7) TMI 1108 - AT - Central Excise

CENVAT credit - inputs - Cement have been used in laying foundation of new machinery - Held that - Hon ble Madras High Court in the case of India Cement Ltd 2015 (3) TMI 661 - MADRAS HIGH COURT has held that staging and supporting structures are essential part of the machinery, so as to run the same for manufacture of dutiable finished products - credit allowed. Light fitting - Held that - the same are also essential inputs for the purpose of manufacture of dutiable finished goods as no production can take place in darkness. Admittedly such light fitting are used in the factory of production - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of Cenvat credit on cement and electrical fittings

Analysis:
1. The appellant, a manufacturer of sugar and molasses, appealed against the disallowance of Cenvat credit on cement and electrical fittings.
2. The show cause notice alleged that the credits taken in April 2008 were wrongly availed, leading to a demand for recovery and penalty.
3. The appellant contended that the Cenvat credit on cement and electrical fittings was taken under proper intimation to the Department and used in laying foundations for various machinery essential for manufacturing dutiable final products.
4. The appellant provided evidence, including material issue slips, to support the use of cement in laying foundations for machinery like evaporators, turbines, fermentation house machinery, and sugar mill equipment.
5. Regarding electrical fittings, it was explained that they were used for lighting machinery in the factory units.
6. The Commissioner (Appeals) upheld the disallowance based on an amendment to Rule 2(k) Explanation-II of CCR, 2004, excluding certain items like cement used for construction from the definition of input.
7. However, the appellant argued that the credits were taken in April 2008, before the amendment came into effect in 2009.
8. The Tribunal noted the rulings in the cases of 'Vandana Global Ltd.', 'Mundra Port', and 'India Cement Ltd.', where higher courts held that inputs used in staging and supporting structures essential for machinery are eligible for Cenvat credit.
9. The Tribunal found that the foundations and structures made with cement were crucial for the proper functioning of machinery, supporting the manufacturing of dutiable products.
10. Similarly, the Tribunal recognized the importance of electrical fittings for lighting machinery in the production process, allowing the appeal and granting consequential benefits to the appellant in accordance with the law.