2011 (4) TMI 803 - AT - Central Excise

Appellate Tribunal allows appeal on cenvat credit denial for storage tank materials

The Appellate Tribunal CESTAT, NEW DELHI allowed the appeal filed by the department, challenging the denial of credit on cement and steel used for the ... Storage tank as capital goods - inputs used in the manufacture of capital goods - eligibility of cenvat credit on inputs for fabrication of listed capital goods - distinction between specifically listed capital goods and permanent structuresStorage tank as capital goods - inputs used in the manufacture of capital goods - eligibility of cenvat credit on inputs for fabrication of listed capital goods - Entitlement to cenvat credit on cement and M.S. bars used in masonry work for fabrication/construction of storage tanks. - HELD THAT: - The Tribunal held that storage tank is specifically included within the definition of capital goods under the Cenvat Credit Rules, 2002 and that the term inputs encompasses goods used in the manufacture of such capital goods which are further used in the factory for manufacture of excisable goods. Reliance on the Larger Bench decision in Vandana Global Ltd. (para 39) was noted: while factory sheds, buildings and foundations are not specifically listed as capital goods, items such as storage tanks have been expressly included and, therefore, duty paid on inputs used in their manufacture is eligible for credit. Applying that principle to the facts, the Tribunal found that cement and M.S. bars used in the manufacture/fabrication of storage tanks installed and used in the appellant's factory for producing synthetic yarn qualify as inputs for a listed capital good and are eligible for cenvat credit. [Paras 5, 6, 7]Credit denied by the lower authority is disallowed; the appellant is entitled to cenvat credit on the cement and M.S. bars used in the fabrication of storage tanks.Final Conclusion: Appeal allowed; impugned order set aside and the appellant held entitled to cenvat credit on the inputs used for fabrication of storage tanks with consequential relief as per law. Issues:Appeal against denial of credit on cement and steel used for fabrication of storage tank.Analysis:The appeal before the Appellate Tribunal CESTAT, NEW DELHI was filed by the department challenging the order of the Commissioner (Appeals) that upheld the denial of credit amounting to Rs.1,61,915/- on cement and steel used for the fabrication of a storage tank.The Advocate for the Appellant argued that the storage tank falls under the definition of capital goods as per Rule 2(a) of Cenvat Credit Rules, 2002. She contended that inputs used for the fabrication of capital goods, which are further used in the manufacturing of excisable goods, are considered as inputs eligible for credit. The Advocate cited the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. vs. CCE, Raipur, emphasizing the eligibility of inputs used in the manufacture of storage tanks for cenvat credit.On the other hand, the Departmental Representative reiterated the findings of the Commissioner (Appeals) and argued that cement and M.S.Bars used for masonry work in the construction of the storage tank may not be eligible for credit as they are part of the permanent structure. The Departmental Representative also relied on the decision of the Larger Bench in the case of Vandana Global Ltd. vs. CCE, Raipur.After hearing both sides and examining the records, the Tribunal noted that the storage tank is specifically included in the definition of capital goods under the Cenvat Credit Rules, 2002. It was established that the storage tanks were used in the factory for the manufacture of final products. Referring to para 39 of the judgment of the Larger Bench in the case of Vandana Global Ltd. vs. CCE, Raipur, the Tribunal highlighted the special treatment provided to items like storage tanks under the Cenvat scheme.Consequently, the Tribunal held that since cement and M.S.Bars were used in the manufacture of the storage tank, the Appellant was indeed eligible for cenvat credit. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief as per the law.