2012 (9) TMI 169 - HC - Central Excise

Cenvat Credit on steel and cement purchased for constructing a storage tank Held that - Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property - 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 - assessee is entitled to the benefit of cenvat credit - in favour of the assessee

Summary

Issues:
1. Challenge to Tribunal's order allowing Cenvat Credit on steel and cement used in the manufacture of a storage tank.
2. Interpretation of capital goods under Cenvat Credit Rules.
3. Eligibility of duty paid on steel and cement used for construction of storage tank and pollution control equipment as Cenvat credit.

Analysis:

1. The appeal by the revenue challenges the Tribunal's order allowing Cenvat Credit on steel and cement used in the manufacture of a storage tank. The Tribunal held that the steel and cement were used as inputs in the construction of capital goods, namely the storage tank and pollution control equipment. The revenue contended that since storage tanks are immovable property and not excisable, the duty paid on steel and cement cannot be availed as Cenvat credit. The Tribunal's decision was based on the definition of capital goods under the Cenvat Credit Rules.

2. The definition of capital goods under the Cenvat Credit Rules includes storage tanks and pollution control equipment. The rules clarify that inputs used in the manufacture of capital goods, even if they are further used in the factory of the manufacturer, are considered as inputs eligible for Cenvat credit. The explanation in the rules specifically excludes certain items like cement used for construction of factory sheds or buildings from being eligible for credit. However, raw materials used in the construction of capital goods, such as storage tanks and pollution control equipment, are eligible for Cenvat credit.

3. The High Court analyzed the provisions of the Cenvat Credit Rules and concluded that the duty paid on steel and cement used for the construction of storage tanks and pollution control equipment could be availed by the assessee as Cenvat credit. The Court emphasized that the definition of inputs includes goods used in the manufacture of capital goods, which are further used in the factory of the manufacturer. Therefore, the Tribunal's decision to allow the Cenvat credit was upheld, and the appeal by the revenue was dismissed. The Court clarified that the immovable nature of storage tanks does not disqualify them from being considered as capital goods for the purpose of availing Cenvat credit.

In conclusion, the High Court ruled in favor of the assessee, upholding the Tribunal's decision to allow Cenvat Credit on steel and cement used in the manufacture of storage tanks and pollution control equipment. The Court's detailed analysis of the Cenvat Credit Rules and the definition of capital goods supported the assessee's entitlement to the credit, despite the immovable nature of the storage tanks.