2020 (3) TMI 836 - AT - Central Excise

CENVAT credit - Capital Goods - allegation that plant erected at site are embedded to the earth and as such, such plant facilities cannot be considered as excisable goods for the purpose of availment of CENVAT credit on such disputed items - requirement to avail 50% of CENVAT credit in respect of capital goods during the year of receipt - allegation that appellant had availed 100% CENVAT credit on the capital goods in the financial year of receipt. HELD THAT - On receipt of the disputed goods, the appellant had availed CENVAT credit under the head inputs . Those goods received in the factory were subsequently used for assembly/manufacture of capital goods, installed within the factory of manufacture of final products. The period under dispute involved in this case is from September 2006 to December 2008 - all goods excepting the excluded items/goods itemised therein, were considered as inputs for the purpose of availment of CENVAT credit. Further, the explanation appended to the said definition clearly specifies that the goods used for manufacture of capital goods, which are further used in the factory of the manufacturer should also be considered as inputs. The documents/records submitted by the appellant clearly demonstrate that the goods in question were used for erection/manufacture of various capital goods namely clinkerisation plant, power plant etc., installed within the factory of manufacture of cement. Thus, as per the definition of inputs contained in Rule 2(k) ibid, the appellant should be eligible for the CENVAT benefit on the disputed goods used for manufacture of capital goods. The denial of CENVAT benefit on the disputed goods should not stand for judicial scrutiny, as against rules framed in the CENVAT Statute - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against impugned orders disputing CENVAT credit on capital goods and initiation of show-cause proceedings for irregular credit availed.

Analysis:
1. The appellant, engaged in cement manufacturing, constructed clinkerisation and thermal power plant for production expansion, availing CENVAT credit on capital items disputed by the department. The department alleged that the plant facilities were embedded to the earth, thus not excisable goods for credit. Show-cause proceedings were initiated for recovery of irregularly availed credit. The appellant contended that the disputed goods were used for installation of capital goods, making them eligible as inputs for credit under Rule 2(k) of CENVAT Credit Rules 2004.

2. The learned consultant for the appellant argued that the appellant's case falls under the definition of 'input' under Rule 2(k), emphasizing that the disputed goods were used for manufacturing capital goods within the factory premises. Referring to judicial precedents like the Madras High Court judgment in Thiru Arooran Sugars case, the consultant asserted that denial of CENVAT credit on disputed goods was not sustainable for judicial scrutiny.

3. The Revenue's representative reiterated the findings of the impugned order, contesting the appellant's eligibility for CENVAT credit on the disputed goods. However, after hearing both sides and examining the case records, the Tribunal found that the disputed goods were indeed used for assembly/manufacture of capital goods within the factory premises, making them eligible for CENVAT benefit as per Rule 2(k) of the CENVAT Credit Rules 2004.

4. The Tribunal referred to the Madras High Court judgment in Thiru Arooran Sugars case, which clarified that goods used in the manufacture of capital goods, further used in the factory, should be considered as inputs for availing CENVAT benefit. Additionally, the Tribunal cited its own previous decision extending CENVAT benefit on disputed goods, considering them as inputs. Following established legal principles and precedents, the Tribunal set aside the impugned orders, allowing the appeals in favor of the appellants with consequential relief, if any, as per law.