2016 (7) TMI 1111 - AT - Central Excise

Cenvat Credit - Capital goods - Pre-fabricated building materials - Held that - The appellant herein has made manufacturing premises/shed using the pre engineered structures/ pre-fabricated building materials . As discussed above, as these goods fall within Chapter 94, in my view, the credit is not admissible - Credit not allowed - Decided against the assessee.

Summary

Issues:
1. Denial of credit on prefabricated building materials used for construction of shed/manufacturing premises.
2. Interpretation of the definition of "capital goods" under Cenvat Credit Rules, 2004.
3. Eligibility of pre-fabricated building materials as capital goods or inputs for availing CENVAT credit.

Analysis:

Issue 1: Denial of credit on prefabricated building materials
The appellant, engaged in manufacturing HDPE bags, availed CENVAT credit on prefabricated building materials used for constructing shed/manufacturing premises. A show cause notice was issued alleging that these materials did not qualify as capital goods, leading to a demand for repayment along with interest and penalty. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals), prompting the appeal before the Tribunal.

Issue 2: Interpretation of the definition of "capital goods"
The appellant argued that the prefabricated building materials were used for constructing factory/shed where capital goods were installed for production and storage of output products. The definition of "capital goods" was examined, which includes goods from specific chapters and components or accessories of capital goods. The appellant contended that the construction itself should be considered a capital good. However, the Tribunal emphasized that the definition specifies certain chapters and uses the term "used in the factory of the manufacturer of the final products," not for the factory/shed/building.

Issue 3: Eligibility of pre-fabricated building materials as capital goods or inputs
The appellant sought alternative consideration of the materials as inputs if not classified as capital goods. Citing precedents, the appellant argued for credit eligibility based on the use of steel and cement for construction. However, the Tribunal distinguished the cases presented, emphasizing that the prefabricated building materials in question did not qualify as accessories to capital goods. The Tribunal also highlighted other cases where credits were allowed for specific uses, such as in the construction of storage tanks or pollution control equipment, which fell within the definition of capital goods.

In conclusion, the Tribunal found that the pre-fabricated building materials used by the appellant fell under Chapter 94 of the Central Excise Tariff Act, not meeting the criteria outlined in the definition of capital goods. Therefore, the credit was deemed inadmissible, and the appeal was dismissed, upholding the impugned order.