2016 (6) TMI 766 - AT - Central Excise

Cenvat credit of the duty paid on cement as capital goods - cement used for installation and erection or plant and machinery - Credit denied on the ground that credit is not admissible on cement, as it does not fall under the category of capital goods and that credit is not admissible as input because cement is not used directly or indirectly in the process of manufacture of final product. Held that - the appellants used the cement for erecting and installing machinery(capital goods). It was used within the factory of production. The definition of capital goods does not require that capital goods should be used in the process of manufacturing. The only condition is that capital goods should be used in the factory of the manufacturer. It cannot be disputed that cement is necessary for laying foundation to fix machinery , and for support structures of capital goods. Following the decision laid by Larger Bench of Apex court in the case of Ramala Sahkari Chini Mills Ltd 2016 (2) TMI 902 - SUPREME COURT I am of the opinion that appellants are eligible for credit of excise duty paid on cement, under the category of inputs. - Decided in favor of assessee.

Issues Involved:
1. Admissibility of Cenvat credit on cement used for foundation and installation of plant and machinery.
2. Consideration of cement as "capital goods" or "inputs" under Cenvat Credit Rules.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Cement:

The appellants, engaged in the manufacture of sugar and molasses, availed Cenvat credit on cement used for the installation and erection of capital goods. The Central Excise Department issued show cause notices alleging that credit on cement is not admissible as it does not fall under the category of capital goods and is not used directly or indirectly in the manufacture of final products. The original authority confirmed the demands with interest and imposed penalties. The Commissioner (Appeals) initially allowed the appeals based on favorable decisions in similar cases, but the department appealed to the Tribunal.

2. Consideration of Cement as "Capital Goods" or "Inputs":

The Tribunal referred the issue to the Larger Bench, which ruled against considering cement as capital goods for Cenvat credit purposes. The matter was remanded to the Commissioner (Appeals) to allow the appellants to refute the Larger Bench decision. The Commissioner (Appeals) upheld the original authority's order without addressing the appellants' alternative plea that cement should be considered as "inputs."

Key Arguments and Legal Interpretations:

- The appellants argued that if credit is not admissible under capital goods, it should be allowed as inputs, citing the definition of "input" prior to the amendment on 07-07-2009, which did not exclude cement.
- The definition of "input" during the material time included all goods used in or in relation to the manufacture of final products, directly or indirectly. The amendment on 07-07-2009 specifically excluded cement.
- The Tribunal noted that the Commissioner (Appeals) failed to consider the alternative plea and the inclusive nature of the term "input" prior to the amendment.
- The Tribunal referenced several case laws and judgments, including the Hon'ble High Court of Andhra Pradesh's decision in CCE, Visakhapatnam-II Vs Sai Samhita Storages(P) Ltd, which allowed credit on cement used as inputs for construction.

Conclusion:

The Tribunal concluded that the appellants are eligible for Cenvat credit on cement under the category of inputs, as the definition of "input" prior to 07-07-2009 included goods used indirectly in the manufacture of final products. The impugned orders were set aside, and the appeals were allowed with consequential reliefs.

Pronouncement:

The judgment was pronounced on 17/05/2016 in open court, setting aside the orders of the Commissioner (Appeals) and allowing the appeals with consequential reliefs.

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