2024 (4) TMI 623 - AT - Central Excise

CENVAT Credit - capital goods or not - various items, used for fabrication / erection of various plants as a part of the Phase III expansion project on lumpsum key basis - invocation of Extended Period of Limitation - HELD THAT - The issue in question has been considered by Chandigarh Bench of this Tribunal in the case of INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX. S.T, PANCHKULA 2020 (1) TMI 373 - CESTAT CHANDIGARH . The facts are more or less similar to the present one inasmuch as the assesse therein are manufacturers of petroleum products falling under Chapter 27 of CETA, 1985. They have availed cenvat credit during July 2007 to March 2012 in respect of various items of capital goods received by them for erection, installation and commissioning of Nephtha Cracker Plant by entering into composite lumpsum turnkey contract with different contractors. Alleging that the assessee is not eligible to avail credit on capital goods in respect of various items of machinery and equipments, instruments falling under Chapter 84, 89 and 90 CETA, 1985 since after fixing of these capital items to the plants fixed become immovable and accordingly non-excisable. The Tribunal had observed that For capital goods Cenvat credit, the items must be among those mentioned in this Rule and should have been used in the factory of the manufacturer and how the items are not used relevant. The words used in Rule 2(a) are used in the factory of manufacturer of the final product not used in the manufacture of final product . Therefore, once any item received in the factory is capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, and is used in the factory, the manufacturer would be entitled to Cenvat credit of excise duty paid in respect of the same. In the appellant s own case MANGALORE REFINERY AND PETROCHEMICALS LIMITED VERSUS C.C.E. S.T., MANGALORE 2023 (8) TMI 696 - CESTAT BANGALORE , this Tribunal has already taken a view that merely because the items are used for fabrication in the erection of storage tank which affixed to earth and become immovable property, cenvat credit availed on individual items cannot be denied being capital goods as defined under Rule 2(a) of the CCR, 2004 following the judgment of the jurisdictional High Court in the case of COMMISSIONER OF C. EX., MYSORE VERSUS ICL SUGARS LTD. 2011 (4) TMI 1065 - KARNATAKA HIGH COURT and other judgments on the subject including the judgment of the Hon ble Chhattisgarh High Court in the case of M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT . There are no merits in the impugned order - appeal allowed.

Summary

Issues Involved:

1. Admissibility of cenvat credit on various items used in the manufacture of sub-plants in Phase III expansion project.
2. Justification of invocation of extended period of limitation.

Summary:

Issue 1: Admissibility of Cenvat Credit

The appellants, engaged in the manufacture and clearance of petroleum products, availed cenvat credit on various items such as down comers, tray decks, separator with lifting beam (frame) assembly, catalyst outlet screen, centrifugal pumps, tools and tackles, regenerator internal steam, gas compressor, tandem dry gas seal, vertical storage container of ST rotor, rotor assembly, turbine assembly, control valve, industrial valves, pipes, tubes, pipe fittings, vales, flanges, heat exchanger, earthing control cables, flame proof lighting, foundation template, etc., used in the Phase III expansion project. The Commissioner denied the cenvat credit on the grounds that these items, after being used in the erection and installation of sub-plants, became immovable property and thus did not qualify as capital goods u/s 2(a) of the Cenvat Credit Rules, 2004.

The Tribunal found that the definition of 'capital goods' u/s 2(a) of the Cenvat Credit Rules, 2004, includes goods falling under Chapter 84, 85, 90, and pipes and pipe fittings, and that these items, when used in the factory, qualify for cenvat credit. The Tribunal noted that the judgment of the Larger Bench in Vandana Global Ltd. was set aside by the Hon'ble Chhattisgarh High Court, which followed the judgments of the Hon'ble Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. and the Hon'ble Madras High Court in Thiru Arooran Sugars. The Tribunal further referenced the case of Indian Oil Corporation Ltd. Vs. Commissioner, where it was held that capital goods used in the factory, even if they become part of an immovable property, are eligible for cenvat credit.

Issue 2: Invocation of Extended Period of Limitation

The appellant contended that the demand for the period from April 2010 to March 2014 was barred by limitation. They argued that there was no suppression of facts or intent to evade duty, as they had availed the cenvat credit in accordance with settled legal principles and had not concealed any information from the Department. The Tribunal agreed with the appellant, noting that in the absence of evidence of suppression or intent to evade duty, the extended period of limitation was not applicable.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, to the appellant. The Tribunal held that the items in question qualify as capital goods u/s 2(a) of the Cenvat Credit Rules, 2004, and that the invocation of the extended period of limitation was unjustified.