2018 (2) TMI 221 - AT - Central Excise

CENVAT credit - capital goods - storage system installed in factory - Mobile Compactor Bin Storage System - FRP Ladder Trays - Elbows - Tunneller - Structrual Steel Rolled/ Structurals - Impeller Spares - Switch Board - Held that - in respect of storage system installed in factory, It is seen that the appellants have not countered the legal argument in the impugned order that the said goods did not fall under the definition of capital good/ inputs appearing in the Cenvat Credit Rules. While theoretically it can be considered the storage system Mezzanine floor would be capital goods but for the purpose of Cenvat Credit Rules the definition is very clear and the said goods do not fall under the definition of input/ capital goods - credit not allowed. Mobile Compactor Bin Storage System - Held that - In normal parlance, the storage bin would be considered as capital goods but for cenvat credit goods have to fall under the definition of capital goods as it appears in the Cenvat Credit Rules 2004. The instant case is classifiable under chapter 94 and is thus clearly not covered under the definition of capital goods. Since the appellants have not countered the regarding the goods not fall under the said definition of the Cenvat Credit Rules the credit of the same cannot be allowed. FRP Ladder Trays - Held that - the same are used for laying electric cable in the refinery. Most of the equipment of the refinery would be classifiable under chapter 84 and 85 of CET and thus would be covered under the definition of capital goods. The electric system would definitely be covered as components of such refinery machinery - credit allowed. Elbows - Held that - tube pipes are specifically covered under the definition of capital goods. The credit of the elbows therefore cannot be denied. Tunneller - Held that - Tunneller is used to connect the tanks to the distributed control system and control room to monitor the activity in the tank. It provides an easy reliable and secure way to networked computers. The said goods would fall under the accessories to the control system. Thus the credit of the same cannot be denied. Structurals used for repair and maintenance of tanks of the refinery - Held that - the definition of capital goods specifically includes storage tanks. However, the items used for construction of tanks are not covered under the definition of capital goods. Tank and refinery being immovable property the credit of the structural steel for repair for tank also cannot therefore be allowed as inputs. Impeller spares, switch board - Held that - both fall under chapter 84 and 85 of CET and thus are covered in the definition of capital goods. The credit of same cannot be denied. Penalty - Held that - the issue under dispute are in the nature of credits on which the appellants could have had bonafide belief. In view of above, penalty under Section 11AC is not justified. The issue regarding the recovery of interest is remanded to the original adjudicating authority to determine after examining the facts regarding utilisation of the said disputed credit or otherwise. Decided partly in favor of assessee, partly against assessee and part matter on remand.

Summary

Issues:
Appeal against denial of cenvat credit on capital goods.

Analysis:
The appellant, Hindustan Petroleum Corporation Ltd., appealed against the denial of cenvat credit on various capital goods. The items on which the credit was denied included a Mobile Compactor Bin Storage System, FRP Ladder Trays, Elbows, Tunneller, Structural Steel Rolled/Structurals, Impeller Spares, and Switch Board. The appellant's counsel argued for the admissibility of the credit based on the usage and purpose of these items in their refinery operations. The counsel relied on previous decisions to support their arguments. The respondent's representative, however, supported the impugned order denying the credit, citing specific reasons related to the classification of the goods under the Cenvat Credit Rules.

The Tribunal examined each item individually to determine the admissibility of cenvat credit. For the Mobile Compactor Bin Storage System, the credit was denied as the structures were considered civil in nature and did not fall under the definition of capital goods as per the Cenvat Credit Rules. The Tribunal found that the appellant did not counter the legal argument regarding the classification of these goods. Similarly, the credit for FRP Ladder Trays was allowed as they were used for laying electric cables in the refinery, falling under the definition of capital goods. Elbows used to connect pipes in the refinery were also deemed admissible as they were covered under the definition of capital goods.

The Tunneller, used to monitor tank activity, was considered an accessory to the control system and eligible for credit. However, the Structural Steel Rolled/Structurals used for tank repair and maintenance were not considered capital goods under the definition, leading to the denial of credit. The Impeller Spares and Switch Board were found to fall under the definition of capital goods and were granted credit. The Tribunal also addressed the appellant's argument regarding the non-utilization of cenvat credit, emphasizing the need for evidence to support such claims.

In conclusion, the Tribunal partially allowed the appeal regarding the reversal of cenvat credit, noting the absence of evidence for non-utilization. The penalty under Section 11AC was deemed unjustified, and the demand for interest was remanded for further examination of the cenvat credit utilization pattern. The judgment was pronounced on 31/1/18, providing a detailed analysis of each item in dispute and the legal principles applied in determining the admissibility of cenvat credit.