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TMI Blog2023 (5) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufacture, to dutiability of on-site erection and certainly not to the scheme of CENVAT credit in such situations. The context of the cited decision and the circulars is, thus, limited to dutiability of such assembled equipment. There is no allegation that the goods procured for the erection of the oxygen plant and the boiler at the refinery of the appellant have not been subjected to duties of central excise or that they were not utilized in the erection of capital goods to be used for manufacture of excisable goods. Intuitively, eligibility for taking credit of duty liability discharged on these goods received in the factory is not to be denied. The error that lower authorities have fallen into is in entertaining the conviction that capital goods has a connotation which, upon embedding in the earth , is excluded from the ambit of Central Excise Act, 1944. Indeed, the statute, concerned with taxability on manufacture of goods , does not acknowledge capital goods at all and it is common knowledge that capital , as appellation, has more to do with accounting treatment than manufacture - As duty discharged on capital goods , in the manner defined for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a brief narrative of the facts against the backdrop of the scheme of credit would serve for a better appreciation of the framework within which the dispute may be amenable to resolution. 3. The appellant is an oil marketing company (OMC) with own refining establishments and, in pursuance of upgrading of their facility at Kochi by erection of oxygen plant and boiler, awarded the project on turnkey basis to M/s Bharat Heavy Plates Vessels Ltd (BHPVL), Vishakapatnam. Capital goods and materials required for undertaking of the contracts were procured on behalf of the appellant and, upon receipt at the refinery, taken on record in the CENVAT credit account. Several notices were issued for recovery of the said credit taken during pendency of that project and, apparently, later too with the practice continuing during subsequent phases of capacity expansion. The present dispute is restricted to the work executed in 2004-06 and, hence, the reference, at least partially, to CENVAT Credit Rules, 2002. 4. The scheme of CENVAT credit, immediately following MODVAT scheme and in continuation of objective of overcoming distortion implicit in cascading effect of tax, is concerned with n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication stage itself, dropped identical proceedings initiated for such availment in a later period. 6. Learned Authorized Representative pointed out that the lower authorities had taken cognizance of circular no. 58/1/2002-CX dated 15th January 2002 and further clarification in circular no. 643/34/2002-CX dated 1st July 2002 of Central Board of Excise Customs (CBEC) for denial of eligibility to take credit on the established principle of the impugned capital goods not being excisable and, thereby, beyond the pale of CENVAT credit. Referring to the decision of the Hon ble Supreme Court in Commissioner of Central Excise, Indore vs. Virdi Brothers [2007 (207) ELT 321 (SC)] , he further argued that the negation of excisability, espoused thus 2. The CEGAT held that no excise duty is leviable and thus these plants are not subject to excisability. It accepted stand of the respondents that these plants are basically systems comprising of various components and are thus in the nature of systems and are not machines as a whole. Accordingly, such systems as a whole cannot be considered to be excisable goods. was approved thus 6. ..the view of the CEGAT cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds is not limited to the general understanding of the expression but has been deliberately crafted to ensure that the scheme for eliminating cascading effect of tax does not exclude assembly of such equipment at site. The essential principle underlying the scheme is that duty discharged on goods procured for use in the manufacture of excisable goods should be neutralized to enable which conformity to either capital goods or inputs suffices for eligibility under rule 3 of CENVAT Credit Rules, 2004. 9. The error that lower authorities have fallen into is in entertaining the conviction that capital goods has a connotation which, upon embedding in the earth , is excluded from the ambit of Central Excise Act, 1944. Indeed, the statute, concerned with taxability on manufacture of goods , does not acknowledge capital goods at all and it is common knowledge that capital , as appellation, has more to do with accounting treatment than manufacture. It also happens that capital goods are, by and large, installed and do not get consumed in the production process enabling the claim for exclusion of some from excisability owing to the peculiar construct of the duty permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and these facts are not disputed. Merely because the various machinery, equipment, appliances and parts have been assembled at the site to set up the Oxygen Plant and such a plant being immovable property, Cenvat credit is sought to be denied. Nowhere in the Cenvat Credit Rules, it is envisaged that the machinery, equipment, appliances or their components should be used as such in the manufacture of excisable goods. The manufacturing plant facility in a factory would comprise of a number of capital goods and all these things have to be assembled together so that they act in unison to perform the required processes. For example, in a sugar factory there may be a Boiler plant for generation of steam, a crusher installed for crushing of the sugar cane, a distillation plant for undertaking the various chemical processes involved in the manufacture of sugar. The boiler, crusher and distillation equipment, all have to be assembled together to form a sugar plant. Merely because all have been assembled together to form a sugar plant, can it be said that the capital goods credit cannot be allowed on Boiler, Crusher or a distillation equipment. Such a view according to us results in an abs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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