2015 (11) TMI 89 - AT - Central Excise

Denial of CENVAT Credit - credit was availed such as Steel Plates, Foundation Bolt, HR Steel Coils, M.S. Angles, C.R. Sheets, Aluminum Coils & Aluminum Sheets used in the fabrication and erection of storage tanks - Capital goods - Held that - Steel materials were used for fabrication and erection of storage tank within the factory of the appellant. The said storage tanks are undisputedly used for the storage of input finished goods and chemicals plant which is further used in the manufacture of the final product. In the chemical plant the storage tank is vital part of the entire plant and machinery. Therefore, in my view storage tank are capital goods. - Cenvat credit in respect of input used in fabrication and erection of storage tank is admissible. As regard the Cenvat credit availed by the appellant in respect of aluminium sheets/coils etc. for insulation of pipes and tubes installed in the appellant factory, I find that in the chemical plant tubes and pipes are integral part of the entire plant. The pipes and tubes are compulsory for the purpose of maintaining temperature insulation and for such insulation the aluminium coils and sheets are used, therefore aluminium coils and sheets are used in plant and the credit should be allowed on such material. Cenvat Credit on the same item i.e. Aluminium sheets/coils used for insulation for the purpose of cooling system, has been allowed. Following the ratio of the above judgments, I am of the view that appellant is entitle for the Cenvat credit in respect of aluminium coils/sheets etc. used for insulation of pipes and tubes in the plant of the appellant. - The foundation bolt admittedly classified by the supplier under Chapter 84 as spare parts. In the definition of capital goods provided under the Cenvat Credit Rules certain chapter has been specified. One of the chapters is chapter 84, and should be used in the factory of the appellant. Since foundation bolt is classified under Chapter 84 and admittedly used in the factory of the appellant, this is sufficient to qualify the item as capital goods in term of definition of capital goods. Therefore the Cenvat credit on the foundation bolt is clearly admissible. Appellant have clearly expressed their intention and activity related to availment of Cenvat Credit on the items in question. With this information, the Revenue was at their own liberty to question the admissibility of Cenvat credit. I am of the view that the informations provided by the appellant are more than sufficient for the Revenue, that if at all they are of the view that the Cenvat credit is not admissible they could have extended their investigation and could have issued show cause notice well within the normal period of one year. In failing to do so, the suppression of facts cannot be alleged on the Appellant. - demand of Cenvat Credit is not sustainable on merit as well as on limitation. The impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Admissibility of Cenvat Credit for steel items used in the fabrication and erection of storage tanks and related equipment.
2. Admissibility of Cenvat Credit for aluminum coils and sheets used for thermal insulation.
3. Admissibility of Cenvat Credit for foundation bolts used in the erection of stacks.
4. Application of limitation period for issuing the show cause notice.

Detailed Analysis:

1. Admissibility of Cenvat Credit for Steel Items:
The appellant availed Cenvat Credit on steel items used for fabricating and erecting storage tanks and related equipment within their factory. The storage tanks were used for storing inputs, finished goods, and chemicals essential for manufacturing the final product. The appellant argued that these storage tanks qualify as "capital goods" under the Cenvat Credit Rules. Citing several judgments, including SLR Steels Ltd. and KCP Ltd., the appellant contended that Cenvat Credit on steel materials used for such purposes is admissible, even if the storage tanks are immovable. The Tribunal found that the storage tanks are indeed capital goods and allowed the Cenvat Credit, referencing the consistent judicial precedent supporting this view.

2. Admissibility of Cenvat Credit for Aluminum Coils and Sheets:
The appellant also claimed Cenvat Credit for aluminum coils and sheets used for thermal insulation of pipes and tubes in their chemical plant. The appellant argued that these materials are integral to maintaining the operational efficiency of the plant and should be considered as part of the capital goods. The Tribunal supported this claim, referencing the National Oxygen Ltd. judgment, which allowed Cenvat Credit for similar insulation materials. Consequently, the Tribunal held that the aluminum materials used for insulation purposes are eligible for Cenvat Credit.

3. Admissibility of Cenvat Credit for Foundation Bolts:
The appellant claimed Cenvat Credit for foundation bolts used in the erection of stacks, which are essential for the disposal of gases produced in the plant. The foundation bolts were classified under Chapter 84 as spare parts, which falls under the definition of capital goods. The Tribunal agreed with the appellant's argument, stating that since the foundation bolts are used in the factory and classified under the appropriate chapter, they qualify as capital goods, and thus, Cenvat Credit is admissible.

4. Application of Limitation Period:
The appellant contended that the show cause notice issued by the department was time-barred as it was issued beyond the normal period of one year. The appellant had informed the department about the setup of the new IPA plant and the availing of Cenvat Credit through letters dated 12/7/2005 and 20/3/2006. The Tribunal found that the appellant had provided sufficient information to the department, which should have prompted any necessary investigations within the normal period. The Tribunal concluded that there was no suppression of facts by the appellant, and therefore, the extended period for issuing the show cause notice could not be invoked. The demand for Cenvat Credit was deemed unsustainable on both merit and limitation grounds.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellant's appeal with consequential relief, affirming the admissibility of Cenvat Credit for the steel items, aluminum coils and sheets, and foundation bolts, and ruling that the show cause notice was time-barred.