2017 (4) TMI 638 - AT - Central Excise

Cenvat credit - cement used in the foundation of machineries erected - Held that - the ld. Commissioner (Appeals) have erred in relying on the ruling of Hon ble Rajasthan High Court in the case of Union of India Versus Hindustan Zinc Limited 2007 (8) TMI 127 - HIGH COURT, RAJASTHAN as the said ruling was in respect of Cenvat Credit Rules, 2002 which have been replaced by Cenvat Credit Rules, 2004 - In the facts and circumstances of this case, cement has been admittedly used in the erection of capital goods, being machinery, without which manufacture of dutiable goods is not possible - Appeal allowed with consequential benefit.

Summary

Issues involved:
Entitlement to Cenvat credit on cement used in the foundation of machineries erected for manufacturing taxable products.

Analysis:
The appellant, a sugar manufacturer, took Cenvat credit on inputs used in machinery foundation. The dispute arose when a Show Cause Notice proposed disallowing the credit on cement used in machinery foundation. The appellant argued that cement was crucial for machinery operation and production of dutiable goods. The dispute led to an Order-in-Original confirming the disallowance and imposing a penalty. The Commissioner (Appeals) upheld the decision, citing a Rajasthan High Court ruling. The appellant appealed, arguing that the ruling was under outdated Cenvat Credit Rules, not applicable to the current rules in place.

The appellant contended that under the new Cenvat Credit Rules, they were entitled to credit on cement used within the factory for machinery erection. Rule 2(k) defined credit as goods used in manufacturing final products, including those used indirectly or for other purposes within the factory. The appellant cited a Karnataka High Court ruling supporting credit on inputs used in fabrication of capital goods. Additionally, a Madras High Court ruling deemed cement and steel used in machinery foundation eligible as inputs.

The Assistant Commissioner supported the initial decision. The Tribunal found the Commissioner erred in relying on an outdated ruling. Under the current rules, cement and steel used in machinery erection were considered inputs, even if not directly used in final product manufacture. As cement was crucial for machinery operation and dutiable goods production, the appellant was entitled to Cenvat credit. The appeal was allowed, setting aside the impugned order and granting consequential benefits to the appellant.