2011 (4) TMI 1065 - HC - Central Excise

Cenvat credit - whether inputs used in the manufacture of storage tanks which are immoveable property is also admissible for cenvat credit - Held that - assessing authority has himself extended the benefit to storage tank storing water as a component to main machinery namely, boiler, he ought to have extended the benefit to the storage tanks which are also part of the factory premises, in which the bye-products are stored and thereafter sold as a finished product, no justification to interfere with the orders passed by appellate authority, decision in favour of the assessee and against the revenue

Summary

Issues:
1. Admissibility of Modvat credit for inputs used in the manufacture of storage tanks.
2. Interpretation of Rule 57U of the Central Excise Rules regarding Modvat credit for specific types of storage tanks.
3. Applicability of Cenvat credit on inputs used in the construction of storage tanks.
4. Inclusion of storage tanks in the definition of capital goods before and after a specific amendment.
5. Extending the benefit of Cenvat credit to storage tanks used for storing bye-products.

Analysis:

1. The main issue in this case was the admissibility of Modvat credit for inputs used in the manufacture of storage tanks. The Tribunal upheld the order allowing Modvat credit for water storage tanks as essential raw material for sugar production. However, there was a dispute regarding the eligibility of Modvat credit for syrup and molasses storage tanks.

2. The interpretation of Rule 57U of the Central Excise Rules played a crucial role in determining the eligibility of Modvat credit for specific types of storage tanks. The assessing authority disallowed Modvat credit for certain storage tanks based on the reasoning that they were non-excisable due to their construction on concrete foundations. The Commissioner disagreed and extended the benefit to all storage tanks, leading to the revenue's appeal to the Tribunal.

3. The case involved a discussion on the applicability of Cenvat credit on inputs used in the construction of storage tanks. The revenue argued that Cenvat credit should not be granted for inputs used in storage tanks where the stored materials were not directly used in the manufacturing process. The Tribunal's decision in a similar case favored granting credit for inputs used in captively manufactured tanks.

4. Another significant issue was the inclusion of storage tanks in the definition of capital goods before and after a specific amendment. The revenue contended that storage tanks were not initially included in the definition of capital goods, and therefore, Cenvat credit should not have been granted for their construction. The Court analyzed the evolution of the definition and the clarificatory nature of subsequent amendments.

5. Lastly, the Court addressed the question of extending the benefit of Cenvat credit to storage tanks used for storing bye-products. The Court emphasized that if the benefit was extended to water storage tanks as essential components of machinery, the same rationale should apply to storage tanks storing bye-products. Ultimately, the Court ruled in favor of the assessee, upholding the orders passed by the appellate authority and answering the substantial questions of law in favor of the assessee against the revenue.