2017 (3) TMI 1283 - AT - Central Excise

CENVAT credit - Whether the appellant is eligible to avail cenvat credit on the items which are used in the transmission line which has been erected as dedicated transmission line only for the appellant s use? - Held that - Cenvat Credit is not eligible only on the ground that these goods are immovable is against the law as settled by the Hon ble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone Ltd. 2015 (5) TMI 663 - GUJARAT HIGH COURT . In that case, the Tribunal had denied the Cenvat Credit on the steel and cement used in the construction of jetty which is used for providing port services/cargo holding services - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is eligible to avail Cenvat credit on items used in the dedicated transmission line for their factory's exclusive use.

Analysis:
The case involved a dispute regarding the eligibility of Cenvat credit on items used in a dedicated transmission line for the appellant's manufacturing plant. The revenue authorities contended that the appellant wrongly availed Cenvat credit on items used for the erection of the transmission line. The authorities argued that the transmission line, being immovable property, did not have an integral relation with the manufacturing process of the final products. The appellant, however, asserted that the Cenvat credit was admissible as electricity was essential for manufacturing cement, and the dedicated transmission line was laid down solely for their factory's use.

The tribunal analyzed the facts and legal precedents cited by both parties. It noted that the transmission line was exclusively for the appellant's use, and the duty-paid items used in its construction were in the appellant's name. The tribunal disagreed with the adjudicating authority's reasoning that Cenvat credit was inadmissible due to the immovability of the transmission line. It referenced a case where the High Court held that goods used in relation to providing output services were eligible for Cenvat credit, irrespective of immovability. Additionally, the tribunal cited a case where Cenvat credit was allowed on structural items used in fabrication, emphasizing the "user test" to determine eligibility.

Furthermore, the tribunal addressed the argument that the transmission line was situated 32 km away from the factory premises, similar to a case involving PVC pipes used for drawing water from a well away from the factory. In that case, Cenvat credit was allowed as the pipes were exclusively used for supplying water to the factory. Applying this precedent, the tribunal concluded that the impugned order denying Cenvat credit was unsustainable and set it aside, allowing the appeal.

In conclusion, the tribunal ruled in favor of the appellant, holding that they were eligible to avail Cenvat credit on items used in the dedicated transmission line for their factory's exclusive use, based on the essentiality of electricity in the manufacturing process and the precedents supporting the admissibility of such credits.