2017 (5) TMI 1243 - AT - Central Excise

CENVAT credit - inputs - capital goods - It is the case of Revenue that the fabricated storage tanks will not amount to excisable goods and the inputs i.e. HR plates used and consumed for fabrication of such tanks cannot be considered as inputs or as capital goods for benefit of Cenvat credit; is a wrong perception and incorrect appreciation of law - Held that - the said storage tanks are used by appellant for storage of crude oil and fabricated in the factory premises, denial of Cenvat credit of the central excise duty paid on such HR plates during the period February 2012 to March 2012 is incorrect. Reliance was placed in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II Versus SLR STEELS LTD. 2012 (9) TMI 169 - KARNATAKA HIGH COURT , where it was held that Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT Credit on HR plates and items under Chapter 72
2. Classification of fabricated storage tanks as capital goods
3. Denial of CENVAT Credit by lower authorities
4. Interpretation of provisions regarding capital goods and inputs
5. Comparison with relevant legal precedents

Analysis:

Issue 1: Availment of CENVAT Credit on HR plates and items under Chapter 72
The appeal challenged the Order-in-Appeal directing the appellant to show cause for availing CENVAT Credit on HR plates and items under Chapter 72. The lower authorities confirmed demands for duty paid on these items, leading to penalties. The appellant contested, arguing that the fabricated storage tanks qualified as capital goods, allowing CENVAT Credit.

Issue 2: Classification of fabricated storage tanks as capital goods
The appellant contended that the fabricated storage tanks, whether purchased or fabricated, should be considered capital goods, thus justifying CENVAT Credit. The argument was supported by citing legal precedents and highlighting the purpose of the tanks in storing raw materials and finished goods. The Departmental representative, however, claimed that the tanks, being immovable and for storing liquids, did not qualify as excisable goods, thus denying CENVAT Credit.

Issue 3: Denial of CENVAT Credit by lower authorities
Both the adjudicating authority and the first appellate authority upheld the denial of CENVAT Credit on the grounds that the fabricated tanks were immovable properties and not excisable goods. The appellant argued that the denial was based on incorrect perception of law and highlighted similar cases where such denial was overturned.

Issue 4: Interpretation of provisions regarding capital goods and inputs
The judgment extensively analyzed the definition of capital goods under the CENVAT Credit Rules, emphasizing that inputs used in the manufacture or construction of capital goods qualified for CENVAT Credit. Key provisions were cited to clarify that even if the storage tanks were immovable properties, the duty paid on inputs for their construction could be utilized for CENVAT Credit.

Issue 5: Comparison with relevant legal precedents
The judgment referenced various legal precedents, including decisions by the Hon'ble High Court and Tribunal cases, to support the appellant's argument regarding the eligibility of CENVAT Credit on inputs used for fabricating storage tanks. The decision of the Hon'ble High Court in a similar case favored the appellant's position, leading the tribunal to set aside the impugned order and allow the appeal.

In conclusion, the judgment ruled in favor of the appellant, setting aside the impugned order and allowing the appeal based on the interpretation of relevant legal provisions and precedents supporting the eligibility of CENVAT Credit on inputs used for fabricating storage tanks classified as capital goods.