2008 (10) TMI 177 - AT - Central Excise

Cenvat credit on inputs i.e. Steel plates, sheets, etc. used in the manufacture of clinker silo which are actually storage tank for the final products in the cement factory - clinker silos are nothing but storage tanks and they are mentioned in the list of the capital goods - fact that the silos are immovable property and not excisable is irrelevant - in terms of the Explanation 2 to Rule 2(k), as so long as the inputs are used in the manufacture of capital goods which are further used in the factory of the manufacturer, the credit could not be denied

Summary

Issues:
Whether inputs used in the manufacture of 'Clinker Silo' for storage in the factory are entitled to Cenvat credit.

Analysis:
The appeal was filed against the Order-in-Original passed by the Commissioner of Customs, Central Excise & Service Tax. The only issue in this case was whether the inputs used in the manufacture of 'Clinker Silo' for storage in the factory are eligible for Cenvat credit. The Revenue argued that as the silos are fixed and considered immovable property, Cenvat credit cannot be claimed on the inputs used in their manufacture. On the other hand, the appellants contended that the silos are storage tanks specified as capital goods, and as long as inputs are used in the manufacture of capital goods further used in the factory, credit cannot be denied. Several case laws were cited to support this argument.

Upon careful consideration, the Tribunal found that the appellants used duty paid inputs for fabricating the silos, which are considered storage tanks falling under the definition of capital goods. The Revenue's denial of credit was solely based on the argument that the silos, being immovable property, are not excisable. However, the Tribunal disagreed with this approach, emphasizing that the crucial point is whether Explanation 2 to Rule 2(k) is satisfied. The Tribunal noted that the inputs, such as steel plates and sheets, were used in the fabrication of silos, which are capital goods used within the factory for storage of final products. As per the Cenvat Credit Rules, the dutiability of capital goods is irrelevant in determining the eligibility for input credit. The Tribunal reiterated that as long as inputs are used in capital goods within the factory, credit must be given as per Explanation 2 to Rule 2(k.

The Tribunal referred to Rule 2(k) for defining "input," which includes goods used in the manufacture of capital goods further used in the factory of the manufacturer. Consequently, the Tribunal concluded that the inputs, like steel plates and sheets, used in fabricating the silos are entitled to credit. Therefore, the impugned order was deemed to have no merit, and the appeal was allowed with consequential relief.