2007 (7) TMI 67 - AT - Central Excise

Cenvat/Modvat - Revenue contended that appellant is not entitle for credit on Pollution Control Equipment and Storage tank on the ground that it is not categorized under capital goods - Held that revenue contention was correct and allowed

Summary

Issues involved:
1. Admissibility of Cenvat Credit on certain items used in the construction of storage tanks and pollution control equipment.
2. Interpretation of the definition of 'Capital Goods' under the Cenvat Credit Rules, 2002.
3. Application of the basic test for levying excise duty on goods.

Analysis:
1. The case involved a dispute regarding the admissibility of Cenvat Credit on items such as Cement, CTD Bar, Channel, Glass Fibre Fabrics, Lappoxi Hardner, and Resin, used in the construction of storage tanks and pollution control equipment. The assessee claimed that these items were essential for the erection and installation of pollution control equipment and storage tanks, which were used in their manufacturing process. The adjudicating authority held that since the storage tanks were immovable property, they were not marketable goods, and thus, Cenvat Credit was not admissible for these items.

2. The Commissioner (Appeals) disagreed with the adjudicating authority's decision and interpreted the definition of 'Capital Goods' under the Cenvat Credit Rules, 2002. He pointed out that "Pollution Control Equipment" and "Storage Tank" fell under the category of 'Capital Goods' as per Rule 5 of the Rules. The Commissioner emphasized that the inputs used in the construction of storage tanks, such as Cement and CTD Bars, were integral to the Effluent Treatment Plant and were considered part of the Pollution Control Equipment. Therefore, he set aside the adjudicating authority's order.

3. The Tribunal analyzed the basic test for levying excise duty on goods, as laid down by the Hon'ble Supreme Court in a previous case. The Court emphasized that for an article to be considered a 'good' and subject to excise duty, it must be marketable or capable of being brought to the market. The Tribunal concluded that the civil construction work of storage tanks and pollution control plant did not meet this basic test and could not be considered as capital goods eligible for Cenvat Credit. Therefore, the Commissioner (Appeals) was found to have erred in treating these items as capital goods, and the original order was restored.

In conclusion, the Tribunal ruled in favor of the Revenue, setting aside the Commissioner (Appeals) order and restoring the original order confirming the demand of Cenvat Credit and penalty imposed on the respondent.