2011 (7) TMI 883 - AT - Central Excise

Can cement be considered as capital goods for the purpose of Cenvat credit when it is used for foundation/supporting structure for machinery in the light of erstwhile Central Excise Rules, 1944/Cenvat Credit Rules, 2002/2004 - Rajasthan High Court in the case of Union of India v. Hindustan Zinc Ltd. (2008 -TMI - 33137 - RAJASTHAN HIGH COURT) wherein it was held that the cement is used in the construction of foundation and it cannot be said to be eligible capital goods - Decided against the assessee

Summary

Issues: Whether cement can be considered as capital goods for the purpose of Cenvat credit when used for machinery foundation/supporting structure.

Analysis:
The Appellate Tribunal CESTAT, Bangalore, addressed the issue of whether cement could be classified as capital goods for Cenvat credit when utilized for machinery foundation/supporting structure. The matter was referred to the Larger Bench by the referral bench. The Revenue contended that the issue had been settled in their favor by the Rajasthan High Court in a previous case involving Hindustan Zinc Ltd. The High Court had ruled that cement used in foundation construction was not eligible for capital goods credit. The Tribunal noted that the respondent sought credit for duty paid on cement used for machinery foundation, arguing it should be considered capital goods. However, the Tribunal referenced the Rajasthan High Court's decision, emphasizing that cement used in foundation construction did not qualify as capital goods under the Cenvat Credit Rules. The High Court had reasoned that cement, as a building material for foundation, did not directly contribute to the manufacturing of the final product, thus disqualifying it from being classified as an input for Cenvat credit. The Tribunal concurred with the High Court's interpretation, stating that the foundation made of cement did not meet the definition of capital goods or inputs as per the relevant rules. Consequently, the Tribunal ruled in favor of the Revenue based on the High Court's decision, indicating that the issue was no longer open for debate. The appeals were directed to be listed before the jurisdictional bench for final hearing and disposal.