2018 (1) TMI 681 - AT - Central Excise

CENVAT credit - Iron and Steel used for making technological structure of sugar factory - iron and steel used as input in construction of godowns, sheds and yards of the sugar plant - Iron and Steel used as inputs for making staging structures to facilitate operation of various machineries - Held that - the issue herein is squarely covered in favor of the appellants in view of the rulings in the case of Mundra Port & Special Economic Zone Ltd. 2015 (5) TMI 663 - GUJARAT HIGH COURT , wherein the Larger Bench ruling of this Tribunal in Vandana Global Ltd. 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) is distinguished and it was held that manufacturer is entitled to Cenvat credit on various items of steel and cement, etc. used in manufacture or fabrication of capital goods and repair to capital goods inside the factory of production. The appellants are entitled to Cenvat credit on all the items on which Cenvat credit was denied - appeal allowed.

Summary

Issues:
Allowability of Cenvat credit for the period June, 2006 to March, 2007 on items like Iron and Steel used for making technological structure of sugar factory, iron and steel used as input in construction of godowns, sheds and yards of the sugar plant, Iron and Steel used as inputs for making staging structures to facilitate operation of various machineries.

Analysis:
The issue in these appeals pertains to the allowability of Cenvat credit for specific items like Iron and Steel used during the period June, 2006 to March, 2007. The appellants, a manufacturer of cane sugar and molasses, availed Cenvat credit on these items which was challenged by the Department. The appellants provided detailed consumption charts and a Chartered Engineer's certificate to support their claim. The Department contended that the items used were not covered under the definition of inputs in Rule 2(k) of CCR, 2004, as they were considered civil constructions for the factory and not capital goods. Consequently, a substantial amount of Cenvat credit was proposed to be disallowed, and penalties were also proposed under relevant rules.

The adjudication relied on a ruling of the Tribunal in a previous case to disallow most of the Cenvat credit claimed by the appellants. The decision included confiscation of certain items and imposition of penalties on the company and its officials. The appellants, being aggrieved by this decision, appealed to the Tribunal. The appellants argued that the previous ruling was no longer valid based on a judgment of the Gujarat High Court, which allowed Cenvat credit on similar items used in construction. They highlighted that the amendments to the Cenvat credit Rules were not clarificatory but substantive in nature, making them eligible for the credit. The appellants also cited other court rulings supporting their claim for Cenvat credit on items used in civil construction and fabrication of capital goods.

After considering the arguments from both sides, the Tribunal found in favor of the appellants. The Tribunal distinguished the previous ruling and held that the appellants were entitled to Cenvat credit on the disputed items used in the factory for production purposes. Consequently, the impugned order disallowing the credit and imposing penalties was set aside. The Tribunal also nullified the penalties imposed on the company and its officials. Additionally, the penalty for non-filing of certain returns was also waived due to justifiable reasons provided by the appellants. The appellants were granted consequential benefits as per the law.

In conclusion, the Tribunal's decision favored the appellants, allowing them to claim Cenvat credit on the disputed items used in the factory for production purposes, overturning the previous decision and penalties imposed.