2018 (6) TMI 377 - AT - Central Excise

Revenue neutrality - benefit of N/N. 67/95-CE - exemption on captive consumption of Cement - time limitation - Held that - There is no dispute as to the consumption of cement for erection structures of plants for manufacturing of cement; even if the appellant is required to discharge duty on such captively consumed cement, they are eligible to avail CENVAT credit of this duty paid on cement captively consumed as it is undisputed that structures made out of captively consumed cement are used in relation to manufacture of final products and duty is discharged. The installation and erection activities by captively consumed cement is for further manufacturing of cement and the said final product cement is cleared on payment of duty - Similar issue came up before Hon ble High Court of Andhra Pradesh in the case of Sai Sahmita Storage Pvt. Ltd., 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT , where Hon ble High Court was considering the eligibility to avail CENVAT credit of duty paid on Cement and TMT Steel Bar for construction of warehouses and while dismissing the appeal of Revenue held that credit needs to be allowed as warehouses are used for rendering of taxable output services. The question of revenue neutrality does arise and it has to be held that credit of the duty paid may be available to the applicant - the entire demand is liable to be set aside on limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of cement captively consumed for construction purposes under notification No. 67/95-CE.

Analysis:
The appeal challenged an Order in Appeal that denied the benefit of notification No. 67/95-CE to captively consumed cement used for construction purposes. The adjudicating authority held that such cement does not qualify for the notification and imposed demands, interest, and penalties. The first appellate authority upheld this decision. The appellant argued that even if the notification does not apply, Central Excise duty paid on cement could be availed as CENVAT credit, as the structures are used in manufacturing dutiable goods. The Commissioner argued that the cement consumed is a finished product, not an input or capital goods, citing legal precedents for strict interpretation of exemption notifications.

Upon examination, it was established that the appellant, a cement manufacturer, used 210 M.Ts of cement captively for expansion without duty payment, claiming the benefit of the notification. The issue centered on revenue neutrality, with the appellant contending that even if duty is paid, CENVAT credit should be available due to the structures' use in manufacturing final products. Legal cases were cited to support this argument, emphasizing the eligibility of CENVAT credit for construction-related inputs used in dutiable output services. The Tribunal found merit in the revenue neutrality argument, citing precedents and holding that the demand should be set aside on limitation grounds, following the Jet Airways case upheld by the Apex Court.

Ultimately, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the availability of duty credit for captively consumed cement used in manufacturing final products. The decision was based on the principle of revenue neutrality and the legal precedent established in the Jet Airways case, ensuring the credit availability for duty paid on such cement.