2016 (6) TMI 606 - AT - Central Excise

Credit on MS items used for repair and maintenance of storage tanks used for storing petroleum products - Held that - The storage tanks are used for storing petroleum products. It is compulsory for the appellant to have these tanks kept under the earth as safety measure. This does not make a storage tank a civil structure. The product that is stored in these tanks are extremely dangerous and there are statutory norms to be followed while transferring, carrying or storing petroleum products. The appellant has to abide by standards/guidelines issued by Oil Industry & Safety Directorate. The product manufactured has to be stored in metallic tanks, which are kept under the earth and these tanks have to be periodically repaired and maintained to prevent seepage. Hence repair and maintenance of storage tanks can be said to be integral part of manufacturing process carried out by appellant. Thus the credit on steel items used for repair and maintenance of storage tanks is admissible. - Decided in favour of assessee

Summary

Issues:
Appeal against order allowing credit on MS items used for repair and maintenance of storage tanks storing petroleum products.

Analysis:
The appeal was filed by Revenue against an order passed by the Commissioner (Appeals) which permitted credit on MS items utilized for repair and maintenance of storage tanks used for storing petroleum products. The respondents, who are manufacturers of petroleum products, had availed credit on HR plates/sheets used for repair and maintenance of storage tanks. The department contended that these goods did not fall under the definition of "inputs" as they were used in the installation of tanks embedded in the earth, which were considered immobile civil structures. A show cause notice was issued, and after due process, the original authority disallowed the credit, ordering recovery of a specific amount along with interest and imposing a penalty. However, in the appellant's own case, the CESTAT had previously allowed the credit, as noted by the Commissioner (Appeals). Additionally, previous judgments in similar cases had ruled in favor of the assessee.

The Tribunal considered the nature of the storage tanks used for storing petroleum products, emphasizing the safety measures required for such tanks. Despite being placed underground for safety reasons, the Tribunal clarified that this did not transform the storage tank into a civil structure. Given the dangerous nature of the stored products and the statutory norms governing their handling and storage, the Tribunal highlighted the necessity for the appellant to comply with industry standards and safety guidelines issued by relevant authorities. The tanks, being metallic and underground, required regular repair and maintenance to prevent seepage, which was deemed an integral part of the manufacturing process undertaken by the appellant.

Consequently, the Tribunal concluded that the credit on steel items used for the repair and maintenance of storage tanks was admissible. Finding no valid grounds to interfere with the impugned order, the appeal was dismissed. The judgment was pronounced in open court, upholding the decision in favor of allowing the credit for the repair and maintenance of storage tanks storing petroleum products.