2017 (8) TMI 1115 - AT - Service Tax

CENVAT credit - capital goods - Diesel Generator - Tacho Generator - Luffing Motor - Hoisting Closing Motor - paint - Revenue is of the view that since the said items are used for further fabrication of Floating Crane, which fall under heading 89.05 and are not covered by the definition of capital goods, as defined under Rule 2 (a) of the CCR, 2004 - Held that - similar issue decided in the case of M/s Omax Auto Limited Versus CCE, Delhi-III 2013 (8) TMI 301 - CESTAT NEW DELHI , where it was held that The purpose for which the goods were used and whether after use the goods became part of plant and machinery fixed to/embedded to the earth is not relevant - credit allowed. As regards paints, reliance placed in the case of COMMISSIONER OF CUS. & C. EX., RAIPUR Versus BHILAI STEEL PLANT 2009 (9) TMI 840 - CESTAT NEW DELHI , where it was held that Cenvat credit in respect of paints are allowed - credit allowed. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of Cenvat credit on specific items used for further fabrication.
2. Interpretation of the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004.
3. Applicability of Tribunal precedents on similar cases.
4. Denial of credit based on subsequent use of capital goods.

Analysis:

1. The appellant, a registered service provider, availed Cenvat credit on various items like Diesel Generator, Tacho Generator, Luffing Motor, Hoisting Closing Motor, and paint, treating them as capital goods. The Revenue contended that these items were used for further fabrication of 'Floating Crane,' falling under a different category and not covered by the definition of capital goods. Show cause notice was issued, leading to an order confirming the demand and penalties.

2. The Commissioner (Appeals) ruled in favor of the appellant, citing that all items fell under Chapter 84 & 85 of the Central Excise Tariff and qualified as capital goods. Precedent cases like Omax Auto Ltd. and CCE, Raipur Vs. Bhilai Steel Plants were referenced to support the eligibility of Cenvat credit for the appellant.

3. The Revenue challenged the Commissioner's reliance on the Omax Auto Ltd. case, arguing that the context of central excise levy in that case was different. However, the Tribunal found no merit in this argument, emphasizing that the disputed issue was about the denial of Cenvat credit and not the subsequent use of capital goods.

4. Regarding the paints, the Revenue contended that the Tribunal decision in the Bhilari Steel Plants case did not discuss Rule 2(k) of the Cenvat Credit Rules. The Tribunal, however, found no reason to deviate from the precedent set by the Bhilari Steel Plants case and allowed the Cenvat credit for paints.

5. Ultimately, the Tribunal rejected the Revenue's appeal, upholding the Commissioner's decision to allow Cenvat credit for the appellant. The judgment emphasized that the subsequent use of capital goods is irrelevant, as long as they fall under the defined categories of capital goods.