2016 (11) TMI 270 - AT - Central Excise

Cenvat credit - Held that - the respondents had fabricated the tanks for storage of molasses in the factory during the period November 2003 to June 2004 and availed Cenvat credit of the duty paid on plates, angles, channels. It is undisputed that during the period in question, storage tank was mentioned as capital goods in the definition of capital goods and was eligible for availment of Cenvat credit of duty paid on such tanks - Decided in favor of the assessee.

Summary

Issues: Eligibility of availing Cenvat credit on duty paid for steel plates, angles, channels used in fabrication of storage tank within factory premises.

Analysis:

1. Issue of Eligibility for Cenvat Credit: The main issue contested by the revenue was the eligibility of the respondent to avail Cenvat credit on duty paid for steel plates, angles, channels used in the fabrication of a storage tank within the factory premises. The revenue argued that since the storage tank is immovable property, Cenvat credit should not be admissible. However, it was found that during the relevant period, storage tanks were considered capital goods eligible for Cenvat credit. The High Court of Karnataka had previously ruled on a similar issue, stating that duty paid on steel and cement used for the construction of storage tanks could be availed as Cenvat credit.

2. Interpretation of Capital Goods Definition: The definition of capital goods under the Cenvat Credit Rules, 2004 was crucial in determining the eligibility for Cenvat credit. The definition included storage tanks used in the factory of the manufacturer of final products. It was clarified that even though storage tanks may be immovable property, they fall under the definition of capital goods. Inputs used in the manufacture of capital goods, which are further used in the factory of the manufacturer, were considered eligible for Cenvat credit.

3. Clarification on Input Definition: The explanation provided further clarified that goods used in the manufacture of capital goods, which are further used in the factory of the manufacturer, are considered inputs eligible for Cenvat credit. However, certain items like cement, angles, and channels used for construction purposes were excluded from the definition of input. The legislative intent was clear that only inputs used in the manufacture or construction of capital goods would qualify for Cenvat credit.

4. Decision and Precedent: The Tribunal upheld the impugned order, citing a previous decision where a similar issue was decided in favor of the respondent. It was emphasized that the storage tank and pollution control equipment constituted capital goods, and any raw material purchased for their construction could be utilized for Cenvat credit. The Tribunal found no merit in the revenue's appeal, as the substantial question of law was answered in favor of the assessee.

In conclusion, the Tribunal rejected the revenue's appeal, confirming the eligibility of the respondent to avail Cenvat credit on duty paid for steel plates, angles, and channels used in the fabrication of storage tanks within the factory premises. The judgment highlighted the importance of interpreting the definitions of capital goods and inputs under the relevant rules to determine the admissibility of Cenvat credit in such cases.