2018 (9) TMI 727 - AT - Central Excise

CENVAT Credit - inputs used by them in manufacture or maintenance of the parts and equipments of the cement plant - whether the appellant is entitled to CENVAT credit on inputs used by them in manufacture or maintenance of the parts and equipments of the cement plant? - Held that - The assessee is entitled to input credit on the items mentioned in terms of Rule 2(k) of CENVAT Credit Rules, 2004 read with Explanation 2 thereof and therefore the demand is liable to be set aside along with the interest and penalty - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS M/S LLOYDS METALS & ENGG LTD 2014 (8) TMI 913 - CESTAT MUMBAI , where credit was allowed on MS bars, beams etc., used for setting up kiln, cooler and chimney etc., in factory - appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of CENVAT credit on steel items used in the factory as supporting structures for capital goods.

Analysis:
The appellant, a manufacturer of cement clinker and cement, claimed CENVAT credit on various steel items used in the factory as supporting structures for capital goods during the erection and installation of machinery. The dispute arose when a show cause notice was issued seeking to deny credit on the ground that these items were not inputs as they were used in structures embedded to the ground and could not be considered as capital goods. The appellant contended that the items were used in the manufacture of capital goods like Pre-Heater, Cooler, Deep Bucket Elevator, Raw Mill, and Cement Mill. The Commissioner denied the credit, stating that the plant itself was not excisable goods, and hence the inputs used in its manufacture could not be considered as inputs under Rule 2(k) of CENVAT Credit Rules, 2004.

The Commissioner confirmed the demand, imposed a penalty, and denied the input credit. However, the appellant argued that the capital goods they manufactured, such as Raw Mill, Coal Mill, Cement Mill, Packing Plant, remained capital goods even if fixed to the ground. The appellant relied on various case laws to support their claim for input credit. The Departmental Representative reiterated that the items used in the manufacture of the plant/parts fixed to the ground could not be considered as goods and hence could not be capital goods, thereby rejecting the appellant's claim for input credit.

The Tribunal examined both contentions and noted that the appellant used inputs for the manufacture and maintenance of various components and parts of the cement plant. Referring to precedents where CENVAT credit was allowed on items used for setting up kilns, coolers, chimneys, blast furnaces, and material handling systems, the Tribunal held that the appellant was entitled to input credit on the items as per Rule 2(k) of CENVAT Credit Rules, 2004. Consequently, the Tribunal set aside the Order-in-Original, allowed the appeal, and held that the demand for denial of credit, interest, and penalty was liable to be set aside.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the claim for CENVAT credit on the steel items used in the factory as supporting structures for capital goods, based on the interpretation of relevant rules and precedents supporting the eligibility for input credit in similar cases.