2012 (9) TMI 709 - HC - Central Excise

Disallownace of Cenvat credit - no storage tank included in the definition of capital goods - Held that - Though in the definition of Rule 57-Q the storage tank was not included, it is clear from the afore-said definition that the tubes, pipes and fittings thereof used in the factory were included in the definition of capital goods. The storage tank has been held to be a component to the main machinery namely, boiler and the benefit is extended to the inputs used in the construction of the storage tank though it is also embedded to the land. On the same reasoning the assessing authority ought to have extended the benefit to the syrup and molasses storage tank also, as they are byproducts in the course of manufacturing activity which are also excisable at the time of selling the same to the assessee. As the assessing authority has himself extended the benefit to storage tank storing water as a component to main machinery namely, boiler, he ought to have extended the benefit to the storage tanks which are also part of the factory premises, in which the byproducts are stored and thereafter sold as a finished product. In that view of the matter,no justification to interfere with the orders passed by the appellate authority - No substantial question of law arises for consideration - in favour of assessee.

Summary

Issues:
- Appeal against Tribunal's order on ModVAT Credit eligibility for certain items
- Disallowance of Cenvat credit on ineligible capital goods
- Order-in-original disallowing Cenvat credit, recovery, interest, and penalty
- Commissioner's order allowing Cenvat credit as 'capital goods'
- Tribunal's decision on Modvat credit eligibility for specific items
- High Court's consideration of the issue in a previous case

Analysis:
1. The Revenue appealed against the Tribunal's decision regarding the eligibility of certain items for ModVAT Credit. The Tribunal had declined to interfere with the Commissioner of Excise's order, which held that the impugned items were entitled to ModVAT Credit.

2. A show-cause notice was issued to the assessee, challenging their eligibility to avail and utilize Cenvat Credit on specific capital goods. The assessing authority disallowed the Cenvat credit on ineligible capital goods, leading to a demand for recovery, interest, and imposition of a penalty.

3. The assessee contended that they were entitled to the Cenvat credit. The order-in-original disallowed the wrongly availed Cenvat credit on ineligible capital goods, leading to a recovery demand, interest, and penalty imposition.

4. The Commissioner of Central Excise, on appeal, held that items used as structural parts and accessories of installed capital goods for repair and maintenance were eligible for credit as capital goods and inputs. The order-in-original was set aside, declaring the assessee eligible for Cenvat credit as 'capital goods,' leading to the Revenue's appeal before the Tribunal.

5. The Tribunal, upon re-examination, found that the assessee had utilized the Cenvat credit on structural items falling within the definition of 'capital goods.' The Tribunal consistently held that the impugned items were entitled to Modvat credit, dismissing the Revenue's appeal based on merit and the bar of limitation.

6. The High Court referred to a previous case involving the same issue, where it was held that storage tanks, though not initially included in the definition of capital goods, were considered as such for Cenvat Credit purposes. The Court found no merit in the present appeal, stating that no substantial question of law arose for consideration.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision on the eligibility of specific items for ModVAT Credit and referring to its previous judgment on the issue of Cenvat Credit for storage tanks.