2012 (9) TMI 854 - AT - Central Excise

Waiver of pre-deposit of duty - Equal amount of penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules - Held that - A perusal of the Rule 2(a) makes it very clear though storage tanks may be immovable property and pollution control equipment are included within the definition of capital goods , input as defined in Rule 2(k) makes it clear that input includes in goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Therefore, the input is not necessarily to be used in the manufacture of final product. By virtue of explanation 2 - goods used in the manufacturer of capital goods which are further used in the factory of the manufacture also falls within the definition of input - applicants are able to make out a prima facie case for total waiver of service tax which is waived and recovery thereof is stayed during pendency of the appeal - Following decision of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II Versus SLR STEELS LTD. 2012 (9) TMI 169 - KARNATAKA HIGH COURT - Stay granted.

Summary

Issues:
Application for waiver of pre-deposit of duty and penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules based on the classification of tanks as capital goods.

Analysis:
The applicant sought a waiver of pre-deposit of duty and penalty amounting to approximately Rs. 1.55 crores, contending that they use various inputs, including iron and steel plates, G.C. Sheets, Chequered Plate, HR Plate, HR Sheet, falling under specific chapters, for manufacturing capital goods, particularly storage tanks used in producing Calcined Alumina. They argued that the storage tanks are not solely for storage but are also integral in the manufacturing process of final products, relying on a decision by the Hon'ble High Court of Karnataka in a similar matter.

The Department, represented by the ld. AR, opposed the applicant's contention, arguing that the tanks in question do not qualify as storage tanks and are classified under Chapter 73, thus not meeting the definition of capital goods. The ld. AR cited a Supreme Court decision in the case of Madras Cements Ltd. to support their argument.

The definition of capital goods under Rule 2A of Cenvat Credit Rule, 2004 was crucial in determining the eligibility of the tanks as capital goods. The definition explicitly includes storage tanks used in the factory of the manufacturer, irrespective of being immovable property. The explanation further clarified that goods used in the manufacture of capital goods, which are then used in the factory, fall within the definition of input. The Tribunal emphasized that storage tanks, regardless of mobility, are considered capital goods, especially when used in processing goods at an intermediate stage. The ruling of the Hon'ble High Court of Karnataka in the case of SLR Steels Ltd. supported the interpretation that inputs used in constructing capital goods are eligible for Cenvat credit, even if the capital goods are immovable property.

Consequently, the Tribunal found merit in the applicant's case for a total waiver of service tax, granting the waiver and staying the recovery during the appeal's pendency. The decision was dictated and pronounced in open court.