2023 (6) TMI 897 - AT - Central Excise

CENVAT Credit - capital goods - various iron and steel items used for fabrication of capital goods - Revenue is of the view that the tanks fabricated are not goods as they are immovable in nature and are not capital goods as defined in Rule 2A of the Cenvat Credit Rules, 2004 - HELD THAT - The storage tanks irrespective of immovable or moveable, are considered as capital goods. The tanks used for processing the goods at intermediate stage. We find that only the goods falling under Chapter 82, 84, 95 and 90 are falling under the definition of capital but they are components, spares and accessories falling under definition (i) and (ii) also are termed as capital goods as per the definition of capital goods under Rule 2A of Cenvat Credit Rules, 2004. The Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II VERSUS SLR STEELS LTD. 2012 (9) TMI 169 - KARNATAKA HIGH COURT held that appellate authority committed a serious error firstly in holding that the storage tank is an immovable property and secondly, on the ground that it cannot be bought and sold in the market, the criteria which is totally unwarranted. These iron and steel items have been used for manufacturing/processing of final products - In that circumstances, any iron and steel items used for fabrication of those tanks are entitled for cenvat credit as input in terms of Rule 2 (k) of the Cenvat Credit Rules, 2004. The appellant has correctly taken the cenvat credit on the items in question - Appeal allowed.

Summary

Issues involved: Denial of cenvat credit on iron and steel items used for fabrication of capital goods.

Summary of Judgment:

Issue 1: Classification of tanks as capital goods
The appellant procured iron and steel items for fabrication of tanks used in processing goods. Revenue contended that tanks are immovable and not capital goods, thus denying cenvat credit. Appellant argued tanks are actively involved in manufacturing process and classified under Chapter 84. Tribunal cited precedents to support tanks as capital goods. Held that storage tanks, whether immovable or movable, are considered capital goods, and iron and steel items used in their fabrication are eligible for cenvat credit as inputs under Rule 2(k) of Cenvat Credit Rules, 2004.

Issue 2: Scope of show-cause notice
Appellant argued that Adjudicating Authority exceeded the show-cause notice's scope by determining tanks were not storage tanks. Tribunal found that the authority's interpretation was incorrect and set aside the order, allowing the appellant's cenvat credit claim on the iron and steel items used for tank fabrication.

Conclusion
The Tribunal ruled in favor of the appellant, holding that the cenvat credit on iron and steel items used for tanks' fabrication is valid. The impugned order was set aside, and the appeal was allowed with any consequential relief.