2016 (11) TMI 819 - AT - Central Excise

Cenvat credit - Cryogenic Tank - whether the central excise duty or service tax is discharged on the cost charged for use of such tanks from the customers. If the answer is in affirmative, the cenvat credit of duty paid on such tank is to be extended - Held that - The appellants have charged separate amount from the customers for transporting Nitrogen and Oxygen in the Cryogenic Tanks and Central Excise duty is discharged on such cost collected from the customers for transporting the goods in the Cryogenic Tank designed for such storage and transportation. In the instant case, there is no dispute that appellants have paid Central Excise duty on the cost of transportation charged for the use of Cryogenic Tank and therefore the appellants are entitled for the cenvat credit of duty paid on the Cryogenic Tanks. The very same principle has been upheld in the case of Inox Air Products Ltd. Vs CCE Nagpur 2009 (7) TMI 129 - CESTAT, MUMBAI wherein the cenvat credit of the service tax paid for GTA service availed by the assessee for outward transportation of the final product from factory to the buyers premises was held to be admissible to them. In that case, appellant transported liquefied gases (final product) from their factory to buyers premises. Since the gases were to be maintained in liquid form at sub-zero temperatures, cryogenic tanks were used for their storage. These cryogenic tanks containing liquefied gases were mounted on goods transport vehicles belonging to GTA who transported the goods from the factory to the buyer premises. The freight for the transportation of the goods was paid by the appellant and this amount was included in the assessable value of the goods for the purpose of payment of duty. The appellants are entitled for capital goods credit on the cryogenic tank used for transporting the liquefied gases as provider of output service - appeal allowed.

Summary

Issues:
- Availment of cenvat credit on Cryogenic Tank used for transporting Oxygen and Nitrogen gases
- Interpretation of Rule 2 (b) of Central Excise Rules regarding capital goods credit
- Dispute over the use of Cryogenic Tank for storage and transportation within the factory
- Examination of whether central excise duty or service tax is discharged on the cost charged for using the tanks

Analysis:
The judgment revolves around the issue of availing cenvat credit on Cryogenic Tanks used for transporting Oxygen and Nitrogen gases. Initially, the lower authorities denied the credit, citing abatement provisions under Notification No.32/2004-ST prohibiting credit on duty paid on inputs or capital goods used for taxable services. The appellant argued that the Cryogenic Tank was used for storage within the factory, satisfying Rule 2 (a) (A) of CCR 2004. It was contended that the tank's subsequent use for transportation of gases to customers was interconnected with manufacturing activities, justifying credit. The Tribunal analyzed whether central excise duty or service tax was discharged on the cost of using the tanks from customers, which, if affirmative, would entitle the appellants to cenvat credit.

The Tribunal observed that the appellants had indeed charged customers for transporting gases in Cryogenic Tanks, and central excise duty was paid on this cost. Citing a precedent involving transportation of liquefied gases in cryogenic tanks, the Tribunal held that such credit was admissible as a provider of output service. The analogy from the precedent supported the decision to allow capital goods credit on Cryogenic Tanks used for transporting gases. Consequently, the impugned order was set aside, and the appeal was allowed, affirming the appellants' entitlement to the cenvat credit.

In conclusion, the judgment clarifies the eligibility of cenvat credit on Cryogenic Tanks utilized for transporting Oxygen and Nitrogen gases. It emphasizes the interconnected nature of activities involving the tanks within the manufacturing process and customer delivery. By examining the discharge of central excise duty on tank usage costs, the Tribunal established the appellants' right to claim capital goods credit, aligning with relevant legal provisions and precedents.