2017 (9) TMI 22 - AT - Central Excise

Cenvat Credit - Cement as inputs - Benefit of N/N. 67/95-CE dated 16.3.1995 - department was of the view that the cement has been utilized for construction activities and therefore is not utilized in or in relation to the manufacture of final products - whether the cement used for setting up of the new plant and machinery installed by the appellant can be considered as an input? - Held that - the definition of input says that input means goods used in or in relation to manufacture of final products or for any other purpose within the factory of production, whether or not it is contained in the final product. This being so, the demand raised is without basis - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the cement used for setting up the new plant and machinery can be considered as an input for availing exemption under Notification No. 67/95-CE.

Analysis:
The case involved the appellants, manufacturers of cement and clinker, who were registered with the Central Excise Department. The dispute arose when the department alleged that the appellants had cleared cement as captively consumed without paying duty, thus denying them the benefit of Notification No. 67/95-CE. The show cause notice issued proposed demanding duty, interest, and penalties. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant's counsel argued that the cement used for setting up new plant machinery qualified as an input under Notification No. 67/95-CE. He contended that the cement was utilized for installation project works and earth filling, meeting the criteria of the notification. On the other hand, the department's representative maintained that the cement was not used in or in relation to manufacturing, justifying the demand raised.

The crucial issue revolved around whether the cement used for setting up new plant machinery could be considered an input. Referring to Rule 2k of CENVAT Credit Rules, 2004, the definition of input encompassed goods used in or in relation to manufacturing final products, directly or indirectly, regardless of whether they were contained in the final product. The Hon'ble Supreme Court's ruling in a relevant case clarified that the term "inputs" should not be narrowly interpreted. As the demand was made before the exclusion of cement as an input, the Tribunal found the demand baseless and ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential relief.

In conclusion, the judgment highlighted the interpretation of "input" under the relevant rules, emphasizing the broad scope of goods considered as inputs for manufacturing processes. The Tribunal's decision provided clarity on the applicability of Notification No. 67/95-CE to the cement used by the appellants for setting up new plant machinery, ultimately ruling in favor of the appellant due to the absence of a valid basis for the demand raised by the department.