Cement not eligible for Cenvat Credit as input or capital goods under Cenvat Credit Rules

UNION OF INDIA Versus HINDUSTAN ZINC LIMITED

UNION OF INDIA Versus HINDUSTAN ZINC LIMITED - 2007 (218) E.L.T. 503 (Raj.) Issues:
1. Disallowance of Cenvat Credit on cement treated as input.
2. Appeal against the order passed by Customs, Excise & Service Tax Appellate Tribunal.
3. Interpretation of Cenvat Credit Rules, 2002 regarding cement as an input.
4. Determination of whether cement qualifies as capital goods under Rule 2(b) of the Cenvat Credit Rules, 2002.

Analysis:
1. The respondent-assessee wrongly claimed Cenvat Credit on cement as an input during a specific period. The Assistant Commissioner confirmed the demand and imposed a penalty, which was later reduced by the Appellate Authority. The Tribunal allowed the appeal, prompting the appellant to challenge the decision under Section 35G(1) of the Central Excise Act, 1944.

2. The substantial question of law before the Court was whether the Tribunal was correct in allowing Cenvat credit on cement as inputs, considering its use in the construction of machinery foundations. The appellant argued that cement, being a building material, does not qualify for Cenvat Credit as an input. Conversely, the respondent contended that cement is essential for operating mines and plays a significant role in manufacturing the final product.

3. The Court referenced a previous judgment to establish that cement, used for building construction, does not qualify as an input for manufacturing the final product. Cement's role in building foundations was deemed insufficient to categorize it as capital goods under Rule 2(b) of the Cenvat Credit Rules, 2002. The Court reiterated that cement cannot be considered an input as per the defined criteria.

4. The Court ultimately held that the Tribunal erred in allowing the appeal, emphasizing that the foundation, constructed using cement, does not meet the criteria to be classified as capital goods. Consequently, the Tribunal's decision was overturned, and the Commissioner's order was reinstated without any costs awarded. The judgment reaffirmed the ineligibility of cement for Cenvat Credit under the specified rules and definitions.