2013 (11) TMI 1389 - AT - Central Excise

Tribunal grants CENVAT Credit for Oxygen Plant machinery

M/s JSW ISPAT STEEL LTD Versus COMMISSIONER OF CENTRAL EXCISE

The Tribunal allowed the appeal by M/s JSW Ispat Steel Ltd., granting them eligibility for CENVAT Credit on machinery/equipment used in setting up an ... Eligibility for capital goods credit – Machinery gone in the fabrication of plant - Revenue was of the view that the plant is an immovable structure and not excisable and no duty has been paid on the plant, the credit is not admissible – Held that:- In the manufacturing plants, all the machineries cannot be used as such and directly, the various machineries and equipments have to function in conjunction and in unison with each other and for this purpose, they are assembled into a plant - Merely because all the individual equipment, machinery or components are assembled together, it will be preposterous to suggest that the capital goods credit cannot be allowed on this individual machinery/equipment or appliances - The purpose of allowing capital goods credit is to relieve the burden of cascading effect of taxes. If that purpose is to be achieved in a meaningful way, the law has to be interpreted in a reasonable manner so that the object is achieved. Following COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Versus PEPSI FOODS LTD. [2010 (2) TMI 608 - PUNJAB & HARYANA HIGH COURT] - ownership of goods is not a criterion for denial of credit on capital goods and even if it is leased for a particular period, the assessee is eligible to take CENVAT Credit - merely because M/s Inox Air Products Ltd. has leased out the plant to the appellant, that does not disentitle the appellant from availing CENVAT Credit of the excise duty paid on capital goods - RAJARAMBAPU PATIL SSK LTD. Versus COMMISSIONER OF C. EX., PUNE-II [2006 (10) TMI 310 - CESTAT, MUMBAI] - CENVAT Credit of excise duty paid on parts, components and accessories would be admissible under the Capital Goods Credit scheme even if they are assembled into goods which are immovable or exempted. COMMISSIONER OF C. EX., MYSORE Versus ICL SUGARS LTD. [2011 (4) TMI 1065 - KARNATAKA HIGH COURT ] - immovability has no bearing on eligibility for availment of CENVAT Credit on capital goods - So long as the individual machinery, equipment or appliance or parts and components fall within the definition of capital goods under Rule 2(A) of the Cenvat Credit Rules, 2004 and so long as they are used within the factory of production for the manufacture of excisable goods which are chargeable to duty, the benefit of capital goods credit cannot be denied. The appellants are rightly entitled for capital goods credit on various machinery, equipment, appliances and parts and components thereof used in the setting up of oxygen plant within the factory premises - Thus the order denying the capital goods credit is unsustainable in law – Decided in favour of Assessee. Issues Involved:1. Eligibility for CENVAT Credit on machinery/equipment used in setting up an Oxygen Plant.2. Definition and scope of 'capital goods' under Cenvat Credit Rules, 2004.3. Impact of immovability of plant on CENVAT Credit eligibility.4. Applicability of extended period for demand and penalty under Section 11A and 11AC of the Central Excise Act, 1944.Detailed Analysis:1. Eligibility for CENVAT Credit on machinery/equipment used in setting up an Oxygen Plant:The appellant, M/s JSW Ispat Steel Ltd., entered into a contract with M/s Inox Air Products Ltd. to set up an Oxygen Plant. The Revenue's contention was that the appellant is not eligible for capital goods credit on the machinery/equipment used in the fabrication of the plant since the plant is an immovable structure and not excisable. The appellant argued that all goods were procured in their name and used within their factory premises, and thus, they are eligible for the credit. The Tribunal concluded that the appellant is entitled to the CENVAT Credit on various machinery, equipment, appliances, and parts used in setting up the Oxygen Plant within the factory premises.2. Definition and scope of 'capital goods' under Cenvat Credit Rules, 2004:As per Rule 2(a) of the Cenvat Credit Rules, 2004, 'capital goods' include goods falling under Chapters 82, 84, 85, 90, and their components, spares, and accessories. The Tribunal noted that the plant was set up using various machinery and equipment falling under these chapters, and these facts were undisputed. The Tribunal emphasized that the purpose of allowing capital goods credit is to relieve the burden of the cascading effect of taxes, and thus, the law must be interpreted reasonably to achieve this objective.3. Impact of immovability of plant on CENVAT Credit eligibility:The Tribunal referred to several judicial precedents, including decisions from the High Courts of Himachal Pradesh and Karnataka, which held that immovability of the plant does not affect the eligibility for CENVAT Credit. The Tribunal rejected the Revenue's argument that the plant's immovability disqualified it from being considered capital goods, stating that the individual machinery and equipment used in the plant's assembly are eligible for credit as they fall within the definition of capital goods under Rule 2(a).4. Applicability of extended period for demand and penalty under Section 11A and 11AC of the Central Excise Act, 1944:The appellant argued that they had declared the availment of credit in their monthly ER-1 Returns and submitted detailed invoices to the department, indicating no suppression of facts. The Tribunal found merit in this argument, noting that the department was aware of the transactions and had audited the appellant's records. Consequently, the Tribunal held that the demand invoking the extended period was not sustainable.Conclusion:The Tribunal allowed the appeal filed by M/s JSW Ispat Steel Ltd., setting aside the order denying the capital goods credit. It concluded that the appellant is entitled to CENVAT Credit on various machinery, equipment, appliances, and parts used in the Oxygen Plant's assembly within their factory premises. The Tribunal also dismissed the Revenue's appeal against the corrigendum issued, rendering it infructuous. The operative portion of the order was pronounced in court.