2015 (10) TMI 1028 - AT - Central Excise

Tribunal affirms CENVAT credit eligibility for inputs in manufacturing capital goods

The Tribunal upheld the eligibility of CENVAT credit on inputs used in manufacturing capital goods within the factory. The appeal by the Revenue was ... CENVAT Credit - manufacture of capital goods in house - fabrication of immovable goods - use of goods falling under sub-heading 7208 and 7216 as inputs/capital goods - Exemption under Notification 67/95-CE - Held that:- Certain items of the plant and machinery such as uncoiler, looper, etc. were purchased from the market and embedded to earth and installed to form a part of the tube mill. Components purchased from the market were like motors, coupling, gear boxes, bearing, castings etc. These were assembled and installed on the site to form part of the tube mill which was also covered in the process of welding facility. - The use of explosives, welding electrodes, lubricating oil and crusher for extraction of limestone and crushing in the mines adjacent to the cement factory of the assessee. CENVAT credit was availed on the items being capital goods like limestone crusher, mining equipment, etc. It was held that only the items falling under specified chapters/heading their spare parts /components/accessories or otherwise specified and used in the factory of manufactured of final products are entitled to credit as capital goods. - Goods fabricated in question qualify as capital goods and also as inputs within the meaning of Rule 2(a) read with Rule 2(k) of the CENVAT Credit Rules, 2004. Accordingly, the assessee is entitled to CENVAT credit availed on the items in question for fabrication of the capital goods in question, further utilised in the factory of production. - Decided against Revenue. Issues Involved:1. Eligibility of CENVAT credit on inputs used for manufacturing capital goods.2. Classification of goods under Chapter 72 and their eligibility as capital goods.3. Treatment of fabricated goods as immovable property and its impact on CENVAT credit eligibility.4. Penalty imposition under Rule 15 of CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Eligibility of CENVAT credit on inputs used for manufacturing capital goods:The assessee, engaged in manufacturing sponge iron, availed CENVAT credit on inputs and capital goods used in the manufacture of capital goods within their factory. The Revenue issued a show cause notice proposing to deny this credit, arguing that the goods used (like HR coils, channels, angles) do not qualify as capital goods under the CENVAT Credit Rules, 2004. The Commissioner (Appeals) allowed the credit, referencing several CESTAT rulings, including Ritesh Trade Fin Ltd. and Divi's Laboratories Ltd., which established that inputs used in manufacturing capital goods within the factory are eligible for credit. The Tribunal upheld this view, confirming that the goods in question qualify as capital goods and inputs under Rule 2(a) and Rule 2(k) of the CENVAT Credit Rules, 2004.2. Classification of goods under Chapter 72 and their eligibility as capital goods:The Revenue contended that the goods falling under Chapter 72 (like HR plates, coils, channels) do not meet the definition of capital goods. However, the Commissioner (Appeals) and the Tribunal found that these goods, used in the fabrication of capital goods within the factory, are eligible for CENVAT credit. The Tribunal emphasized that the credit is admissible under the CENVAT Credit Rules, 2004, as the goods were used for manufacturing capital goods, which were further used in the production process.3. Treatment of fabricated goods as immovable property and its impact on CENVAT credit eligibility:The Revenue argued that the fabricated goods, being immovable, do not qualify for CENVAT credit. The Commissioner (Appeals) and the Tribunal rejected this argument, stating that the immovability of the capital goods is irrelevant for the purpose of CENVAT credit eligibility. The Tribunal referenced previous rulings, including Vandana Global Ltd. and Upper Ganges Sugar & Industries Ltd., to support that goods used in the fabrication of capital goods are eligible for credit, irrespective of their immovability.4. Penalty imposition under Rule 15 of CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944:The original adjudicating authority imposed a penalty under Rule 15 of the CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944. However, the Commissioner (Appeals) found no grounds for penalty as the credit was rightly availed. The Tribunal upheld this decision, stating that since the credit was admissible, there was no liability for interest or penalty.Conclusion:The Tribunal upheld the Commissioner (Appeals)'s decision, confirming the eligibility of CENVAT credit on inputs used in manufacturing capital goods within the factory. The appeal by the Revenue was dismissed, and the cross-objection by the assessee was disposed of, entitling the assessee to consequential relief as per law. The judgment reinforced the interpretation of CENVAT Credit Rules, 2004, regarding the eligibility of inputs and capital goods, even when the fabricated goods are immovable.