2023 (7) TMI 427 - AT - Central Excise

Extended period of limitation - CENVAT Credit - appellant are not the manufacturers of the final product TGT plant demand on the ground that the fact regarding assembling/manufacture of TGT - Plant by Thermax Ltd. came to the knowledge of department only at the time of audit by department, which would otherwise have escaped attention - HELD THAT - The respondent had availed credit on goods mentioned in the invoices provided by the contractor to the respondent. The goods on which such credit was taken are components, spares and/or accessories of goods classifiable under chapter 84, 85 or 90 of the First Schedule to the Central Excise Tariff Act, 1985. It is not disputed that the component/parts of TGT plant were received in the factory premises of the respondent under duty paid invoices which was in the name of the respondent. Admittedly, the TGT plant was manufactured out of such parts/spares/components and such plant was used in the manufacture of the dutiable final product. There is no dispute that machineries/components received at the factory of the respondent on which the credit has been availed are indeed capital goods in terms of Rule 2(a) of the CENVAT Credit Rules as is evident from the fact that the credit arrangement has been restricted in the impugned show cause notice to 50% in each year. The Tribunal in several earlier decisions has held that the prerequisite for availment of CENVAT credit in respect of capital goods in the factory of manufacturer is its receipt in the factory and use in the manufacture of dutiable final product. The Tribunal in a similar factual matrix in the case of GUJARAT AMBUJA CEMENTS LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH 2000 (8) TMI 178 - CEGAT, NEW DELHI , held that they are eligible to the benefit of Modvat credit on parts, components and accessories of DG sets in terms of the provisions of Rule 57-T(7) of the Central Excise Rules, we do not deem it necessary to pronounce upon the other submissions of the appellants. The impugned order is restored - Appeal dismissed.

Summary

Issues Involved:
1. Admissibility of Cenvat Credit on parts, components, spares, and accessories used in the Tail Gas Treatment Plant (TGT Plant).
2. Whether the TGT Plant becomes an immovable property upon erection and commissioning.
3. Ownership and possession of the TGT Plant at the time of availing Cenvat Credit.
4. Applicability of extended period of limitation and penalty.

Summary of Judgment:

1. Admissibility of Cenvat Credit:
The respondent availed Cenvat Credit on parts, components, spares, and accessories used in the TGT Plant, which were received under duty-paid invoices in the respondent's name. The Commissioner (Appeals) allowed the credit, stating that these items are directly used in the manufacture of dutiable final products (lead, zinc, etc.), and thus qualify as capital goods. The Tribunal upheld this view, citing previous judgments (e.g., Gujarat Ambuja Cement, NRC Ltd.) that support the admissibility of credit on components used in the manufacture of capital goods within the factory.

2. TGT Plant as Immovable Property:
The department argued that the TGT Plant becomes an immovable property upon erection, making it exempt from duty and thus ineligible for credit. However, the Tribunal found that the credit was availed on parts and components, not on the entire plant. The plant's status as immovable property does not affect the eligibility of credit on its components.

3. Ownership and Possession:
The department contended that since the TGT Plant was handed over to the respondent only after commissioning, the respondent was not in possession of the plant when the credit was availed. The Tribunal dismissed this argument, stating that the ownership of goods is irrelevant for credit eligibility. The crucial factor is the receipt of goods in the factory under duty-paid invoices, which was undisputed.

4. Extended Period of Limitation and Penalty:
The department invoked the extended period of limitation, arguing that the fact of assembly by Thermax Ltd. came to light only during an audit. The Tribunal, however, noted that the department had access to all statutory records, including credit records, and thus the extended period was not applicable. Consequently, the penalty imposed by the Additional Commissioner was also set aside.

Conclusion:
The Tribunal dismissed the department's appeal, restoring the Commissioner (Appeals)'s order that allowed the respondent to avail Cenvat Credit on the parts, components, spares, and accessories used in the TGT Plant. The Tribunal emphasized adherence to settled legal principles and previous judicial decisions, affirming that the credit availed was in accordance with the Cenvat Credit Rules.