2009 (1) TMI 270 - AT - Central Excise

Cenvat Credit Inputs used to manufacture capital goods - The appellant taken Cenvat credit to the tune of Rs. 31,48,420/- on MS plates /Mill Plates, MS Angles, MS Channels, MS Beams and Welding Electrodes used for the manufacture of capital goods (storage tanks) held that - When the Commissioner in the impugned order has held that the power plant was an excisable commodity and therefore the Modvat credit is not deniable. Then, in the present appeal, filed by the Revenue when there is no challenge to these findings of the Commissioner nor is there a proposal/ground taken to revive the allegations in the show cause notice. Then, such appeals are not maintainable

Summary

Issues Involved:
1. Eligibility of Cenvat credit on inputs used for the manufacture of capital goods.
2. Interpretation of the definition of 'capital goods' under Cenvat Credit Rules.
3. Applicability of Explanation 2 to Rule 2(k) of Cenvat Credit Rules.
4. Dispute regarding the nature of storage tanks as excisable goods.
5. Compliance with the show cause notice requirements for denial of Cenvat credit.

Issue 1: Eligibility of Cenvat credit on inputs for capital goods:
The appellant, a manufacturer of VP Sugar and Molasses, claimed Cenvat credit on MS plates, Mill Plates, MS Angles, MS Channels, and Welding Electrodes used for manufacturing storage tanks. The Revenue contended that the inputs were not entitled to Cenvat credit, leading to a show cause notice for irregular credit availment. The Adjudicating Authority confirmed the duty demand and imposed a penalty, upheld by the Commissioner (A). The appellant argued that the inputs were used for constructing storage tanks on the factory premises and cited precedents supporting their claim.

Issue 2: Interpretation of 'capital goods' definition:
The appellant asserted that the storage tanks qualified as capital goods, justifying the Cenvat credit on inputs used for their manufacture. The Revenue argued that as the storage tanks were immovable and not excisable goods, the appellant could not avail of Cenvat credit on the inputs. The Tribunal examined the definition of 'capital goods' under the Cenvat Credit Rules to determine the eligibility of the storage tanks for Cenvat credit.

Issue 3: Applicability of Explanation 2 to Rule 2(k) of Cenvat Credit Rules:
The Tribunal analyzed Explanation 2 to Rule 2(k) of the Cenvat Credit Rules, which allows credit on goods used for manufacturing capital goods further used in the factory. It was established that the storage tanks, being capital goods, met the criteria for availing Cenvat credit on inputs used in their fabrication.

Issue 4: Dispute over the nature of storage tanks as excisable goods:
The Revenue contended that the storage tanks were not excisable goods due to being immovable and embedded in the earth, thus challenging the eligibility of Cenvat credit on inputs used for their construction. However, the Tribunal found that the storage tanks qualified as capital goods under the Cenvat Credit Rules, supporting the appellant's claim for Cenvat credit.

Issue 5: Compliance with show cause notice requirements:
The Tribunal noted that the show cause notice did not dispute the receipt of inputs or the fabrication of storage tanks on the factory premises. As no other grounds were cited for denying Cenvat credit, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal.

This detailed analysis of the judgment addresses the various legal issues involved in the dispute over the eligibility of Cenvat credit on inputs used for manufacturing capital goods, emphasizing the interpretation of relevant rules and precedents to reach a conclusive decision in favor of the appellant.