2016 (4) TMI 492 - AT - Central Excise

Admissibility of Cenvat credit - Rule 2(a)(A) of Cenvat Credit Rules 2004 - Inputs like TOT/TMT Rods, Cement used in the manufacture of water tank to purify water for use in their Captive Power Plan - Revenue contended that the said storage tank is fully embedded to the ground and not remain goods - Held that - by relying on the decision of Karnataka High Court in the case of Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd. 2012 (9) TMI 169 - KARNATAKA HIGH COURT as considered by the First Appellate Authority also which is squarely applicable to the facts and circumstances of the present appeal, the appellant is admissible for Cenvat credit. - Decided against the revenue

Summary

Issues:
Interpretation of Rule 2(a)(A) of Cenvat Credit Rules 2004 regarding admissibility of credit for inputs used in the manufacture of storage tanks.
Applicability of the case law Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd. [2012(280) E.L.T. 176(Kar.)] in determining admissibility of credit.
Validity of the First Appellate Authority's decision in allowing the appeal based on the case law.

Analysis:
The appeal before the Appellate Tribunal CESTAT Kolkata involved a dispute regarding the admissibility of credit for inputs used in the manufacture of a storage tank. The Revenue contended that as the storage tank was fully embedded in the ground, it did not qualify as goods, thus no credit should be allowed to the Respondent under Rule 2(a)(A) of the Cenvat Credit Rules 2004. The Revenue argued that the interpretations given by the First Appellate Authority were incorrect, citing paragraph Nos. 9 and 10 of the Order-in-Appeal dated 06.11.2013. However, the First Appellate Authority had relied on the case law of Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd. [2012(280) E.L.T. 176(Kar.)] in allowing the appeal of the Respondent. The Karnataka High Court in the case observed that inputs used in the manufacture of capital goods, which are further used in the factory, qualify as input for availing cenvat credit, irrespective of whether the final product is movable or immovable. The Court clarified that the duty paid on inputs used in the construction of capital goods is eligible for cenvat credit, except for specific items like cement and steel used for construction purposes unrelated to the capital goods. The Tribunal upheld the Order-in-Appeal dated 06.11.2013, dismissing the Revenue's appeal based on the applicability of the case law and the clear provisions of the law regarding cenvat credit eligibility for inputs used in the manufacture of capital goods, including storage tanks.

The case law Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd. [2012(280) E.L.T. 176(Kar.)] played a crucial role in the decision, emphasizing the definition of capital goods under Rule 2(a)(A) of the Cenvat Credit Rules 2004. The Court's interpretation clarified that inputs used in the manufacture of capital goods, even if immovable, are eligible for cenvat credit, subject to specific exclusions for items used in construction activities unrelated to the capital goods. The Tribunal found the case law directly applicable to the facts of the present appeal, affirming the First Appellate Authority's decision based on the principles established in the case law. The Tribunal's ruling highlighted the importance of distinguishing between inputs used directly in the manufacture of capital goods and those used for construction purposes unrelated to the final product, ensuring clarity on the eligibility of cenvat credit in such scenarios.

In conclusion, the Appellate Tribunal CESTAT Kolkata upheld the Order-in-Appeal dated 06.11.2013, dismissing the Revenue's appeal and affirming the admissibility of cenvat credit for inputs used in the manufacture of storage tanks based on the interpretations of Rule 2(a)(A) of the Cenvat Credit Rules 2004 and the precedent set by the case law Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd. [2012(280) E.L.T. 176(Kar.)]. The decision underscored the importance of adhering to the legal definitions and principles governing cenvat credit eligibility for inputs used in the production of capital goods, irrespective of the mobility or immobility of the final product.