2014 (9) TMI 297 - HC - Central Excise

CENVAT Credit - Whether, Cenvat Credit is admissible on HR Plates, Sections, Sheets, etc. (falling under Chapter No. 72 of Central Excise Tariff Act, 1985) as Capital Goods - fabrication of storage tank for sugar cane juice clarifier. - components spares and accessories - Held that - Notification of the Legislature is very clear that it is only inputs used in the manufacture or construction of capital goods which is construed as input and cenvat credit is available on the duty paid in purchase of such inputs. If the cement, angles, channels, Centrally Twister Deform bar (C.T.D.) or Thermo Mechanically Treated bar (T.M.T.) and other items are used in the construction of factory shed, building or lying of foundation, the duty paid on such items the assessee would not be entailed to cenvat credit. Similarly, though the assessee is entitled to cenvat credit of cement and steel used in the manufacture of capital goods viz. storage tank, if any structure for support of capital goods is constructed and steel and cement is used for such support, the assessee is not entitled to the benefit of cenvat credit on the duty paid on such cement and steel. Therefore, there is no ambiguity in any of these provisions. When 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. Therefore, the 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 under the circumstances. Therefore, the Tribunal was justified in setting aside the said order and holding that the assessee is entitled to the benefit. no reason to interfere with the impugned order passed by the Tribunal, the same is hereby sustained along-with the reasons mentioned herein - Following decision of Commissioner of Central Excise, Bangalore-II Vs. SLR Steels Ltd. 2012 (9) TMI 169 - KARNATAKA HIGH COURT - Decided against Revenue.

Summary

Issues:
Appeal against impugned orders dated 19.10.2005 and 22.6.2006 - Admissibility of Cenvat Credit on HR Plates, Sections, Sheets under Chapter No. 72 of Central Excise Tariff Act, 1985 as Capital Goods.

Analysis:
1. The appeal was admitted based on the substantial question of law regarding the admissibility of Cenvat Credit on specific goods under Chapter No. 72 of the Central Excise Tariff Act, 1985 as Capital Goods.

2. The respondent-assessee availed Cenvat Credit on HR Plates and sections during the assessment year but faced a demand notice for disallowance. The Deputy Commissioner initially dropped the demand, but the Commissioner (Appeals) Central Excise later allowed the appeal filed by the Department, leading to subsequent appeals and orders by the Tribunal.

3. The Tribunal remanded the matter for fresh adjudication, and the Commissioner (Appeal) Central Excise eventually accepted the claim of the assessee. The Department appealed again, leading to the present appeal before the High Court.

4. During the hearing, it was noted that the goods in question were transformed inside the factory to be used as components of capital goods. However, Chapter 72 did not align with the definition of capital goods under the Cenvat Credit Rules.

5. Legal precedents were cited, such as the case of Commissioner of Central Excise & Customs vs. Rashtriya Ispat Nigam Ltd., emphasizing the distinction between goods used in the manufacture of final products and those used for repairs of capital goods.

6. Referring to the case of Commissioner of Central Excise, Bangalore-II vs. SLR Steels Ltd., the judgment highlighted the specific criteria for availing Cenvat Credit on inputs used in the construction of capital goods, emphasizing the legislative intent behind the rules.

7. The case of Union of India vs. Associated Cement Company Ltd. was cited to support the entitlement of Modvat credit on capital goods used for specific manufacturing purposes, further reinforcing the interpretation of capital goods in relevant contexts.

8. The judgment concluded that the Tribunal's order was justified based on established legal principles, and the substantial question of law favored the assessee, resulting in the dismissal of the Department's appeal.

In summary, the High Court upheld the Tribunal's decision, emphasizing the legal interpretation of capital goods and the eligibility criteria for availing Cenvat Credit, ultimately ruling in favor of the respondent-assessee and dismissing the Department's appeal.