Appellants entitled to Cenvat credit on cement as "inputs" under Cenvat Credit Rules

The Tribunal held that the appellants are entitled to Cenvat credit on cement as "inputs" under the Cenvat Credit Rules. The definition of "input" prior to 07-07-2009 encompassed goods used indirectly in manufacturing final products, including cement. The Tribunal overturned the lower authorities' decisions, allowing the appeals and granting consequential reliefs to the appellants.

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Issues Involved:
1. Admissibility of Cenvat credit on cement used for foundation and installation of plant and machinery.
2. Consideration of cement as "capital goods" or "inputs" under Cenvat Credit Rules.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Cement:

The appellants, engaged in the manufacture of sugar and molasses, availed Cenvat credit on cement used for the installation and erection of capital goods. The Central Excise Department issued show cause notices alleging that credit on cement is not admissible as it does not fall under the category of capital goods and is not used directly or indirectly in the manufacture of final products. The original authority confirmed the demands with interest and imposed penalties. The Commissioner (Appeals) initially allowed the appeals based on favorable decisions in similar cases, but the department appealed to the Tribunal.

2. Consideration of Cement as "Capital Goods" or "Inputs":

The Tribunal referred the issue to the Larger Bench, which ruled against considering cement as capital goods for Cenvat credit purposes. The matter was remanded to the Commissioner (Appeals) to allow the appellants to refute the Larger Bench decision. The Commissioner (Appeals) upheld the original authority's order without addressing the appellants' alternative plea that cement should be considered as "inputs."

Key Arguments and Legal Interpretations:

- The appellants argued that if credit is not admissible under capital goods, it should be allowed as inputs, citing the definition of "input" prior to the amendment on 07-07-2009, which did not exclude cement.
- The definition of "input" during the material time included all goods used in or in relation to the manufacture of final products, directly or indirectly. The amendment on 07-07-2009 specifically excluded cement.
- The Tribunal noted that the Commissioner (Appeals) failed to consider the alternative plea and the inclusive nature of the term "input" prior to the amendment.
- The Tribunal referenced several case laws and judgments, including the Hon'ble High Court of Andhra Pradesh's decision in CCE, Visakhapatnam-II Vs Sai Samhita Storages(P) Ltd, which allowed credit on cement used as inputs for construction.

Conclusion:

The Tribunal concluded that the appellants are eligible for Cenvat credit on cement under the category of inputs, as the definition of "input" prior to 07-07-2009 included goods used indirectly in the manufacture of final products. The impugned orders were set aside, and the appeals were allowed with consequential reliefs.

Pronouncement:

The judgment was pronounced on 17/05/2016 in open court, setting aside the orders of the Commissioner (Appeals) and allowing the appeals with consequential reliefs.

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