2008 (4) TMI 299 - AT - Service Tax

CESTAT rules on Cenvat credit eligibility for cement plant construction components

India Cements Versus Commissioner of Central Excise, Salem

The Appellate Tribunal CESTAT, CHENNAI ruled in favor of the appellants regarding the eligibility of Cenvat credit on items used in constructing a cement ... Credit – capital goods – components/parts/accessories - according to the appellants, items (such as cement, MS plates, MS angles, MS sheets, MS channels, MS flats etc.,), being components/parts /accessories of cement manufacturing plant, are eligible for capital goods credit u/r 2(a)(A)(iii) of the CCR, 2004 – assessee have also cited Circular dated 3-4-2000 in F. No. B-4/7/2000-TRU which is in their favour – prima facie assessee’s case is strong – stay is granted Issues:1. Eligibility of Cenvat credit on items used in the construction of a cement manufacturing plant.2. Interpretation of rule 2(a)(A)(iii) of the Cenvat Credit Rules, 2004.3. Treatment of items as capital goods or inputs.4. Applicability of case law in supporting the appellant's claim for Cenvat credit.Issue 1: Eligibility of Cenvat credit on items used in the construction of a cement manufacturing plant:The judgment addressed the issue of whether items such as cement, MS plates, MS angles, MS sheets, MS channels, and MS flats used in the construction of a 'dry process cement manufacturing plant' are eligible for Cenvat credit. The appellants argued that these items are components/parts/accessories of a cement manufacturing plant and thus qualify for capital goods credit under rule 2(a)(A)(iii) of the Cenvat Credit Rules, 2004. They contended that the cement plant falls under Chapter 84 of the Central Excise Tariff Schedule, making the items used for structural support eligible for credit. The respondent opposed the claim, citing a decision of the Rajasthan High Court.Issue 2: Interpretation of rule 2(a)(A)(iii) of the Cenvat Credit Rules, 2004:The Tribunal analyzed the provisions of rule 2(a)(A)(iii) of the Cenvat Credit Rules, 2004 to determine the eligibility of the items for Cenvat credit. The rule specifies that components, spares, and accessories of goods falling under certain chapters of the Central Excise Tariff Schedule are considered capital goods eligible for credit. The appellants argued that the items used in the construction of the cement plant fall within this definition, while the respondent contested this interpretation based on the Rajasthan High Court's decision.Issue 3: Treatment of items as capital goods or inputs:The judgment also considered whether the items in question could be treated as 'inputs' as defined under the Cenvat Credit Rules, 2004. The appellants presented arguments supporting both the classification of the items as capital goods and as inputs. They relied on case law to bolster their contentions regarding the eligibility of the items for Cenvat credit.Issue 4: Applicability of case law in supporting the appellant's claim for Cenvat credit:The Tribunal reviewed the case law provided by the appellants in support of their claim for Cenvat credit on the items used in the construction of the cement manufacturing plant. The judgment noted that the case law, along with the provisions of the Cenvat Credit Rules and a Board's Circular, seemed to favor the appellants' position. Consequently, the Tribunal granted a waiver of pre-deposit and a stay of recovery in relation to the assessed dues, indicating a prima facie case in favor of the appellants.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI highlights the key issues surrounding the eligibility of Cenvat credit on items used in the construction of a cement manufacturing plant, the interpretation of relevant rules, the classification of items as capital goods or inputs, and the application of case law in supporting the appellant's claim.