2013 (5) TMI 241 - AT - Central Excise

Cenvat credit on H.P. Plates, Angles, Channels treated as items of capital goods - denial of claim as per the dept the mentioned items were neither capital goods nor inputs - whether various steel items used in fabrication of tanks embedded to earth tanks would be eligible for cenvat credit - Held that - As regards jigs, the same is specifically covered by the definition of capital goods as given in Rule 2(a) of Cenvat Credit Rules and, therefore, the steel items used for fabrication of jigs would be eligible for cenvat credit as inputs. Gantry rails has to be treated as part of the EOT Crane system, which covered by Chapter 84 and hence is capital goods. As decided in CCE Raipur Vs. Ambuja Cement Eastern Ltd. (2003 (10) TMI 589 - CESTAT, NEW DELHI) steel items used for fabrication of gantry rails on which EOT cranes mines would be eligible for cenvat credit as inputs, as the definition of inputs also includes the items used for fabrication of capital goods used in the factory. Commissioner (Appeals) s order disallowing the cenvat credit in respect of steel items used for embedded to earth tanks is upheld as from the way Rule 2 (a) is worded, it is absolutely clear that the various items mentioned in this Rule has to be goods i.e. movable properties. Since the impugned order does not mention the separate account of cenvat credit in respect of the steel items used for storage tanks and steel items used for gantry rails and jigs, for quantification of the cenvat credit demand, the matter is to be remanded. Penalty levy is deleted as the issue involved relates to interpretation of the provisions of Cenvat credit Rules on which there are and have been contradictory judgements, imposition of equal penalty is not called for.

Summary

Issues Involved:
Interpretation of the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 regarding eligibility of cenvat credit for steel items used in manufacturing processes.

Analysis:

1. Eligibility of Cenvat Credit for Steel Items:
The appellant, a manufacturer of steel poles and structures, availed cenvat credit for various steel items used in their manufacturing processes. The department disputed the eligibility of cenvat credit for these items, leading to the issuance of show cause notices. The original adjudicating authority and the Commissioner (Appeals) both held that the steel items in question did not qualify as capital goods or inputs. The appellant argued that the steel items were essential for fabricating storage tanks and gantry rails, citing relevant case laws to support their claim.

2. Arguments and Counterarguments:
The appellant contended that the steel items were primarily used in fabricating tanks, which are covered under the definition of capital goods. They also highlighted precedents where steel items used in similar contexts were deemed eligible for cenvat credit. On the other hand, the departmental representative argued that tanks embedded to earth did not meet the criteria of capital goods as per the rule definitions. The discussions revolved around the interpretation of the term "capital goods" and its applicability to the specific steel items in question.

3. Tribunal's Decision and Reasoning:
The Tribunal analyzed the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, emphasizing that the items specified must be movable goods. It referenced previous judgments and a Larger Bench decision to establish that structures fixed to earth, like tanks embedded underground, do not qualify as capital goods. Consequently, the Tribunal upheld the disallowance of cenvat credit for steel items used in embedded tanks but set aside the denial for items used in gantry rails and jigs. The matter was remanded for quantifying the cenvat credit demand accordingly.

4. Conclusion and Penalty Decision:
The Tribunal concluded the appeals by upholding the disallowance of cenvat credit for steel items used in embedded tanks while overturning the denial for items used in gantry rails and jigs. It set aside the penalty imposed due to contradictory judgments on the interpretation of Cenvat Credit Rules. The cases were remanded for quantification of cenvat credit demands based on the Tribunal's directions.

In summary, the judgment clarified the distinction between movable goods qualifying as capital goods and immovable structures, leading to a nuanced decision on the eligibility of cenvat credit for specific steel items used in manufacturing processes.