2011 (7) TMI 993 - AT - Central Excise

Whether the M.S. plates, beams, angles, channels, sheets etc. used for repair and replacement of damaged parts of cement plant and machinery - clin, pre-heater, cement mill, raw mill, coal mill etc. are eligible for Cenvat credit either as capital goods or as inputs Held that - foundation and supporting structures embedded to earth are capital assets and the same do not qualify as capital goods as defined in Rule 2(a) of Cenvat Credit Rules and hence the steel items used for erection of the supporting structures are not eligible for Cenvat credit. order denying Cenvat credit in respect of these items is upheld Whether unmachined steel castings and rough HRCS castings used for replacement of damaged parts of the cement plant and machinery are eligible for Cenvat credit Held that - these items are used as a replacement for parts of the machinery and hence the same have to be treated as components and accessories of the cement, plants and machinery. Commissioner (Appeals) s order denying Cenvat credit in respect of these items is not sustainable Whether nitrogen gas falling under Chapter 28 and PVC sheets plastic sheets of Chapter 39 are eligible for Cenvat credit Held that - appellant have not specified as to how the same are used in or in relation to the manufacture of the finished goods. Commissioner (Appeals) finding denying the Cenvat credit upheld

Issues Involved:
1. Eligibility of M.S. plates, beams, angles, channels, sheets, etc., used for repair and replacement of cement plant and machinery for Cenvat credit.
2. Eligibility of iron and steel structures and tower material under Chapter Heading 73.08 for Cenvat credit.
3. Eligibility of unmachined steel castings and rough HRCS castings used for replacement of cement plant parts for Cenvat credit.
4. Eligibility of rope asbestos/sheet steam jointing and similar items used for plugging leakages for Cenvat credit.
5. Eligibility of nitrogen gas under Chapter 28 and PVC sheets/plastic sheets of Chapter 39 for Cenvat credit.
6. Eligibility of aluminium conductors under sub-heading 7614.10 for Cenvat credit.

Detailed Analysis:

1. Eligibility of M.S. Plates, Beams, Angles, Channels, Sheets, etc.
The Tribunal considered whether these items used for repair and maintenance of plant and machinery are eligible for Cenvat credit. The Hon'ble Rajasthan High Court in Union of India v. Hindustan Zinc Ltd. and the Hon'ble Chhattisgarh High Court in Ambuja Cements Eastern Ltd. v. C.C.E., Raipur held that such items used for repair and maintenance are eligible for Cenvat credit. The Tribunal concluded that these items used for repair and maintenance are eligible for Cenvat credit, overturning the Commissioner (Appeals)'s order.

2. Eligibility of Iron and Steel Structures and Tower Material
The Tribunal upheld the Commissioner (Appeals)'s decision, referencing the Larger Bench decision in Vandana Global Ltd. v. C.C.E., Raipur, which held that foundation and supporting structures embedded to earth do not qualify as capital goods under Rule 2(a) of Cenvat Credit Rules. Therefore, steel items used for erection of supporting structures are not eligible for Cenvat credit.

3. Eligibility of Unmachined Steel Castings and Rough HRCS Castings
The Tribunal found that these items, used as replacements for parts of machinery, should be treated as components and accessories of the cement plant and machinery. Thus, the Commissioner (Appeals)'s order denying Cenvat credit for these items was deemed unsustainable.

4. Eligibility of Rope Asbestos/Sheet Steam Jointing
The Tribunal held that asbestos jointing sheets used for plugging leakages in pipes are eligible for Cenvat credit as they are used for repair and maintenance. The Tribunal referenced its previous decision in Oswal Overseas Ltd. v. C.C.E., Meerut-II, which treated such items as components/integral parts of machinery.

5. Eligibility of Nitrogen Gas and PVC Sheets/Plastic Sheets
The Tribunal held that nitrogen gas used in connection with repair and maintenance jobs is eligible for Cenvat credit, citing the decision in C.C.E. & Cus., Guntur v. Andhra Cements Ltd. However, for PVC sheets and synthetic rolls of plastic sheets, the Tribunal upheld the Commissioner (Appeals)'s decision as the appellant did not specify their use in the manufacture of finished goods.

6. Eligibility of Aluminium Conductors
The Tribunal upheld the denial of Cenvat credit for aluminium conductors, classifiable under sub-heading 7614.90, as they are not covered by the definition of capital goods. The Tribunal referenced its decision in Sarita Steel & Industries Limited v. C.C.E., Visakhapatnam-I, which held that aluminium conductors under this sub-heading are not eligible for Cenvat credit.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order denying Cenvat credit for M.S. Angles, Channels, Plates used for supporting structures, aluminium conductors, and PVC sheets/plastic sheets. However, it set aside the order denying Cenvat credit for M.S. Plates, Beams, Angles used for repair and maintenance, unmachined steel castings, rough HRCS castings, asbestos jointing sheets, and nitrogen gas used for repair and maintenance. The matter was remanded for re-quantification of the Cenvat credit demand and re-determination of the penalty.

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