2009 (7) TMI 940 - AT - Central Excise

Summary

Issues:
Interpretation of Cenvat credit rules regarding classification of inputs used in manufacturing process as capital goods; Whether steel items like plates, angles, channels, and joists qualify as inputs for final products like sponge iron, runners, and risers; Consideration of goods embedded to earth as immovable property affecting Cenvat credit eligibility.

Analysis:
The case involved a manufacturer of sponge iron, ingots, runners, and risers who utilized steel items in the fabrication of plant and machinery. The Department contended that the resulting products from these structural items were embedded to earth, thus challenging the classification of these items as goods and the eligibility of Cenvat credit. The Commissioner upheld the demand of duty disallowing Cenvat credit, imposing penalties and interest.

The appellant argued that the definition of "input" under Cenvat credit rules encompasses goods used directly or indirectly in manufacturing finished products, emphasizing that inputs need not be part of the final products. They cited judicial precedents to support the broad interpretation of the term "in relation to" and contended that items embedded to earth should not be considered immovable property. The appellant asserted that the inputs used were related to products akin to those addressed in the cited judgments.

In defense of the Commissioner's order, the Joint CDR highlighted the specific definitions of "inputs," "final products," and "capital goods" in the Cenvat Credit Rules, asserting that inputs must be linked to final products specified in the rules. The argument posited that steel items like plates, angles, channels, and joists were not inputs for sponge iron, runners, or ingots but for structural items, which were deemed immovable goods or machinery not subject to duty, thus challenging the Cenvat credit claim.

Upon careful consideration, the Tribunal disagreed with the appellant's contention that sponge iron, runners, and risers could be treated as final products in relation to the steel items used. Consequently, the Tribunal held that the appellant failed to establish merit for waiving the pre-deposit of the duty demanded. However, in a favorable gesture, the Tribunal decided to waive the pre-deposit of penalty and interest given the circumstances. The appellant was directed to deposit the entire duty amount within a specified timeline, with the waiver of interest and penalty contingent on compliance until the appeal's disposal.