2016 (6) TMI 606 - AT - Central Excise

Tribunal Upholds Credit for Steel Items in Tank Repairs

The appeal was dismissed as the Tribunal upheld the order allowing credit on steel items used for repair and maintenance of storage tanks storing ... Input tax credit on inputs - repair and maintenance as integral part of manufacturing process - immobile civil structure test - classification of goods when embedded for safety - applicability of industry safety norms to tax classificationInput tax credit on inputs - repair and maintenance as integral part of manufacturing process - immobile civil structure test - Credit of MS items (HR plates/sheets) used for repair and maintenance of storage tanks storing petroleum products was admissible as inputs. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) conclusion that storage tanks, though embedded in the earth for safety, do not become immobile civil structures for the purpose of denying input credit. The tanks are metallic receptacles required by statutory safety norms for storage of hazardous petroleum products and must be periodically repaired and maintained to prevent seepage. Such repair and maintenance are integral to the appellant's manufacturing process of petroleum products. Earlier decisions in the appellant's own case and other fora were noted in support of allowing credit. On these grounds, the disallowance, recovery, interest and penalty imposed by the original authority were found to be unsustainable and the appellate order allowing credit was affirmed. [Paras 3, 4]The appeal is dismissed and the Commissioner (Appeals) order allowing credit on steel items used for repair and maintenance of storage tanks is upheld.Final Conclusion: The Tribunal upheld the grant of input credit on MS items used in repair and maintenance of metallic storage tanks for petroleum products, rejecting the view that embedding the tanks in earth converts them into civil structures disentitling credit; the Revenue's appeal is dismissed. Issues:Appeal against order allowing credit on MS items used for repair and maintenance of storage tanks storing petroleum products.Analysis:The appeal was filed by Revenue against an order passed by the Commissioner (Appeals) which permitted credit on MS items utilized for repair and maintenance of storage tanks used for storing petroleum products. The respondents, who are manufacturers of petroleum products, had availed credit on HR plates/sheets used for repair and maintenance of storage tanks. The department contended that these goods did not fall under the definition of 'inputs' as they were used in the installation of tanks embedded in the earth, which were considered immobile civil structures. A show cause notice was issued, and after due process, the original authority disallowed the credit, ordering recovery of a specific amount along with interest and imposing a penalty. However, in the appellant's own case, the CESTAT had previously allowed the credit, as noted by the Commissioner (Appeals). Additionally, previous judgments in similar cases had ruled in favor of the assessee.The Tribunal considered the nature of the storage tanks used for storing petroleum products, emphasizing the safety measures required for such tanks. Despite being placed underground for safety reasons, the Tribunal clarified that this did not transform the storage tank into a civil structure. Given the dangerous nature of the stored products and the statutory norms governing their handling and storage, the Tribunal highlighted the necessity for the appellant to comply with industry standards and safety guidelines issued by relevant authorities. The tanks, being metallic and underground, required regular repair and maintenance to prevent seepage, which was deemed an integral part of the manufacturing process undertaken by the appellant.Consequently, the Tribunal concluded that the credit on steel items used for the repair and maintenance of storage tanks was admissible. Finding no valid grounds to interfere with the impugned order, the appeal was dismissed. The judgment was pronounced in open court, upholding the decision in favor of allowing the credit for the repair and maintenance of storage tanks storing petroleum products.