Appeal on Cenvat credit for non-manufacturing use upheld by Tribunal, penalty set aside.

The appeal involved the disallowance of Cenvat credit on goods used for non-manufacturing purposes. The Commissioner (Appeals) allowed the credit for water tanks but disallowed it for supporting structures like M.S. Beams and Joists. The Tribunal upheld the decision, citing the definition of capital goods. The penalty was set aside due to conflicting decisions on the issue. The case was remanded for re-quantification of the Cenvat credit demand.

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Issues:
Disallowance of Cenvat credit on specific goods used for non-manufacturing purposes.

Analysis:
The case involved the disallowance of Cenvat credit amounting to Rs. 53,974/- on specific goods used for construction/repair of civil structures, sheds, and water tanks for non-manufacturing purposes. The Department issued a show cause notice for this disallowance, which was upheld by the Asstt. Commissioner along with interest and penalty. However, on appeal to the Commissioner (Appeals), the order-in-original was set aside, and the appeal was allowed. This led to the Revenue filing an appeal against the Commissioner (Appeals) order.

The matter was decided ex parte as the respondent did not appear despite receiving a notice for the hearing. The Department argued that the issue of eligibility for Cenvat credit on the goods in question had been decided against the respondent by the Larger Bench of the Tribunal in a previous case. It was contended that the goods used for fabrication/repair of civil structures/sheds were not eligible for Cenvat credit, and the storage tanks used for non-manufacturing purposes were also ineligible.

Upon careful consideration of the submissions and the records, it was determined that the M.S. Beams, M.S. Joist, and Channels used as supporting structures or for sheds were not eligible for Cenvat credit as they were used for making structures fixed to the earth. However, regarding the water tanks, it was noted that the definition of capital goods included tanks, and as long as they were used within the factory, they would be covered by the definition of capital goods regardless of their specific use.

Therefore, the Commissioner (Appeals) order allowing Cenvat credit in respect of the storage tanks was upheld, while the portion of the order permitting Cenvat credit for the supporting structures was set aside. It was highlighted that conflicting decisions had been present on the issue of eligibility of Cenvat credit for steel items used for supporting structures, which was finally settled by the Larger Bench of the Tribunal in a specific case. Consequently, the penalty was deemed unwarranted and set aside.

The appeal was disposed of with directions for the Original Adjudicating Authority to re-quantify the Cenvat credit demand based on the above decisions.

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