2016 (11) TMI 1326 - AT - Central Excise

Tribunal allows Cenvat credit on pollution control equipment and repair items for manufacturing excisable goods

The Tribunal ruled in favor of the appellants in two appeals regarding Cenvat credit disallowance. Firstly, the Tribunal allowed Cenvat credit on ... Cenvat credit on pollution control equipment - Capital goods definition including pollution control equipment - Cenvat credit on inputs used in fabrication, repair and maintenance - Availability of credit consequent to amendment in Cenvat provisionsCenvat credit on pollution control equipment - Capital goods definition including pollution control equipment - Cenvat credit is admissible on inputs used in manufacture of the biogas plant (pollution control equipment). - HELD THAT: - The Tribunal found as a fact that the assessee fabricated and constructed the biogas plant which constituted pollution control equipment and that the gas produced therefrom was utilised in the manufacture of an excisable product. Given the specific inclusion of pollution control equipment within the definition of capital goods and the use of the inputs for manufacture of that capital asset which is integrally connected to production of excisable goods, the inputs utilised in construction of the biogas plant qualify for Cenvat credit. The Tribunal therefore allowed the appeal in respect of the disallowance confirmed by the authorities below. [Paras 7]Appeal allowed and Cenvat credit granted for inputs used in manufacture of the biogas plant, with consequential benefits.Cenvat credit on inputs used in fabrication, repair and maintenance - Availability of credit consequent to amendment in Cenvat provisions - Cenvat credit is admissible on items such as welding electrodes, plates, wires and other specified inputs used within the factory for fabrication, repair, maintenance and captive consumption. - HELD THAT: - The Tribunal noted the changed statutory position permitting credit on inputs utilised in the manufacture or in the factory of production and observed that the items in question were used within the factory either for fabrication of capital goods, for repair and maintenance, or for other factory purposes. Although the question of welding electrodes has been the subject-matter of other proceedings, no stay of tribunal or High Court orders allowing credit had been placed and consistent Tribunal practice in similar appeals favoured allowing the credit. In view of the amended Cenvat scheme and precedential consistency, the Tribunal held that credit on the listed items including welding electrodes is allowable. [Paras 8]Appeal allowed and Cenvat credit granted on all the disputed items including welding electrodes, with consequential benefits.Final Conclusion: Both appeals are allowed: Cenvat credit is permitted for inputs used in construction of the biogas (pollution control) plant and for the specified factory-use items including welding electrodes; benefits to follow consequentially. Issues:1. Disallowance of Cenvat credit on pollution control equipment.2. Disallowance of Cenvat credit on items like welding electrodes, plates, winding wire, etc., treated as capital goods.Analysis:Issue 1: Disallowance of Cenvat credit on pollution control equipmentThe appellants, manufacturers of sugar and molasses, appealed against an Order-in-Appeal alleging inadmissible credit availed on certain items. The dispute arose as the authority disallowed the credit on pollution control equipment, considering it not directly related to the manufacture of excisable goods. The appellants argued that as per the policy, they procured the goods for a biogas plant used in treating distillery effluents, which was integral to their manufacturing process. They contended that pollution control equipment fell under the definition of capital goods and thus, credit should be allowed. The Tribunal acknowledged that the biogas plant was pollution control equipment and its output was used in manufacturing excisable goods. Consequently, the Tribunal allowed the appeal, granting Cenvat credit on the inputs utilized for the biogas plant.Issue 2: Disallowance of Cenvat credit on specific itemsIn another appeal, the appellants contested the disallowance of Cenvat credit on items like welding electrodes, plates, winding wire, etc., treated as capital goods. They argued that these items were used for repair, maintenance, and fabrication of machinery within the factory premises. The Tribunal noted the changes in Cenvat credit provisions, allowing credit on all items utilized in production. Considering the issue of Cenvat credit on welding electrodes pending before the Apex Court, the Tribunal decided to grant credit on welding electrodes in line with previous decisions for consistency. Therefore, the Tribunal allowed the appeal, permitting Cenvat credit on all items in question, including welding electrodes, for repair and maintenance purposes.In conclusion, the Tribunal ruled in favor of the appellants in both appeals, allowing Cenvat credit on pollution control equipment and various items used in the factory premises, including welding electrodes, plates, winding wire, etc., for repair and maintenance activities.