2012 (4) TMI 534 - AT - Central Excise

Tribunal Upholds Exclusion of LDO and HSD from Cenvat Credit, Defers Decision on Input Services

The Tribunal rejected the appeal (E/764/10) regarding the admissibility of Cenvat credit on LDO and HSD, affirming that duty paid on these items is not ... CENVAT Credit - LDO and HSD - Held that:- Credit of duty paid on input and Capital goods is admissible under the Cenvat Credit Rules. The terms input and Capital goods are defined in the Rules in clause (g) of Rule 2 of Cenvat Credit Rules, 2002 (subsequently clause (k) of Rule 2 of Cenvat Credit Rules 2004). High Speed Diesel and Motor Spirit were specifically excluded from the definition of input right from the inception. Light Diesel Oil (LDO) was added to the exclusion list vide Noti.No.13/2003 CE(NT) dt.01.03.2003. W.e.f. 01.03.2003, LDO along with Diesel and Motor Spirit are items outside the definition of inputs. Explanation 1 to the clause leaves no doubt whatsoever that LDO, High Speed Diesel Oil and Motor Spirit shall not be treated as input for any purpose whatsoever. The provisions of Cenvat Credit Rules (w.e.f. 01.03.2003) exclude HSD and LDO from the definition of input in unequivocal terms and there is no ambiguity or confusion in the provisions. Intent, purpose and object of the amendment are clear that Government modified the rules to bar credit on LDO by excluding it from the inputs as defined under the cenvat credit Rules irrespective of its use. HSD always remain outside the ambit. - hat an item is used in the manufacture of final goods is not sufficient to define it as input. Motor Spirit, High speed Diesel and LDO are specifically excluded from the purview of inputs. Even if HSD and LDO is used in the manufacture of final goods, it cannot be considered as input for purpose of credit under the Rules ibid. When an item has been specifically excluded from the definition, the usage criterion cannot bring it in the ambit of definition - Decided against assessee. Issues:1. Admissibility of Cenvat credit on LDO and HSD.2. Eligibility of Cenvat credit on input services used in the manufacture of towers.Analysis:Issue 1: Admissibility of Cenvat credit on LDO and HSDThe appeal (E/764/10) pertains to the availment of Cenvat credit on LDO/HSD and its eligibility during the period from April 2004 to March 2005. The Commissioner (Appeals) had considered the issue of admissibility of Cenvat credit on LDO and HSD, concluding that these items are specifically excluded from the definition of inputs under the Cenvat Credit Rules. The rules unequivocally exclude LDO and HSD from the definition of inputs, as clarified through notifications and amendments. The appellant contended that LDO and HSD should be considered inputs based on their usage in generating electricity. However, the Tribunal rejected this argument, emphasizing that items excluded from the definition of inputs cannot be brought back in through usage criteria. Therefore, the appeal was rejected, affirming that duty paid on LDO and HSD is not eligible for credit post the amendment on March 1, 2003.Issue 2: Eligibility of Cenvat credit on input servicesThe second appeal (E/765/10) concerns the eligibility of Cenvat credit on input services utilized in the manufacture of towers. The appellant had not made any submissions apart from stating the usage of LDO and HSD as fuel for electricity generation. As there were no additional arguments presented, the Tribunal found no reason to interfere with the impugned order. However, due to ambiguity regarding the appellant's intention to appear for a personal hearing or make submissions for this appeal, the Tribunal decided to consider appeal E/765/10 separately and grant the appellants another opportunity for a personal hearing. Consequently, only appeal E/764/10 was taken up for final decision, while E/765/10 was deferred for further proceedings.In conclusion, the Tribunal upheld the exclusion of LDO and HSD from the definition of inputs for Cenvat credit purposes, emphasizing that even if these items are used in manufacturing, they do not qualify for credit. The judgment underscores the importance of adhering to statutory definitions and rules in determining the admissibility of Cenvat credit, thereby providing clarity on the scope of eligible items for credit under the Cenvat Credit Rules.