2017 (11) TMI 1329 - AT - Central Excise

CENVAT credit - inputs - various structural items which have been used either in the making of parts and components of plant and machinery or used for repair of such plant and machinery - Held that - all the impugned structural steel items have been used in the factory of the assessee Consequently, it is covered within the main definition of inputs - the adjudicating authority has proceeded step by step and discussed the various relevant exclusion, which proved the correctness of credit availed - credit remains allowed. CENVAT credit - steel items used for the construction of storage tanks in the form of clinker silos - denial on the ground that such steel structures have been issued by the civil department of the assessee for construction of clinker storage tank which is a civil construction work which is covered in the exclusion part of the definition of input under Rule 2(k) - Held that - The clinker storage tank is used in the nature of capital goods. Since such capital goods cannot be suspended in mid air and for effective operation, the same needs to be kept on suitable support which became part of the storage tank i.e. capital goods - There is no doubt that such clinker storage tank is used in the manufacture of their final products - It has been consistently held by the Tribunal that such support structures are to be considered as part of the capital goods and goods used in the fabrication of such structures will be covered as inputs - credit allowed. CENVAT credit - certain quantity of steel structures which have been procured by the assessee during the period prior to 01.04.2011 (date of amendment of definition of inputs) - credit for such items have been availed in the subsequent years when the new definition was in place - Held that - This Tribunal has been consistently holding that cenvat credit is admissible in respect of such steel structures used in the manufacture of capital goods - even for the period prior to 01.04.2011 cenvat credit was admissible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of Cenvat credit on steel items used in the manufacture of cement.
2. Interpretation of the definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004.
3. Disallowance of Cenvat credit on steel items used in the construction of storage tanks.
4. Denial of Cenvat credit on steel structures procured before 01.04.2011.

Analysis:

Issue 1:
The appellant, engaged in cement manufacturing, availed Cenvat credit on steel items used in plant maintenance and upgradation. The authorities contended that these items were not eligible as inputs under the Cenvat Credit Rules, 2004, as they were part of immovable property. Show cause notices were issued for recovery of the credit. The Commissioner disallowed a portion of the credit, leading to appeals from both the assessee and the Revenue.

Issue 2:
The Commissioner's order focused on the amended definition of "input" under Rule 2(k) of the Cenvat Credit Rules, 2004. The exclusion clauses (B) and (F) were analyzed to determine the eligibility of Cenvat credit on the steel items. The Commissioner referred to Circulars and verification reports to support the disallowance of credit on items used in civil construction work. The Commissioner allowed partial credit but ordered recovery and imposed penalties under Rule 15(1) of the Cenvat Credit Rules, 2004.

Issue 3:
The assessee contended that the steel items used in the construction of storage tanks were essential for the cement manufacturing process and should be considered as inputs. The Tribunal noted that the tanks were part of capital goods and supported the manufacturing process. Previous Tribunal decisions were cited to establish the admissibility of credit on such support structures.

Issue 4:
Regarding the denial of credit on steel structures procured before 01.04.2011, the Tribunal overruled the adjudicating authority's decision. Citing precedents, the Tribunal held that even for the period before 01.04.2011, Cenvat credit on steel structures used in the manufacture of capital goods was admissible. The Tribunal also acknowledged the admissibility of credit on items used in repair and maintenance, following a High Court ruling.

In conclusion, the Tribunal dismissed the Revenue's appeal and modified the order to allow the assessee's appeal, emphasizing the admissibility of Cenvat credit on steel items used in the manufacturing process and maintenance of machinery.