Tribunal grants Cenvat credit on cement used for machinery foundation, benefiting sugar manufacturer

The Tribunal allowed the appeal, setting aside the order disallowing Cenvat credit on cement used in machinery foundation for manufacturing taxable products. The appellant, a sugar manufacturer, successfully argued that under the current Cenvat Credit Rules, cement used within the factory for machinery erection qualifies as an input eligible for credit. The Tribunal held that cement was essential for machinery operation and the production of taxable goods, thus entitling the appellant to the credit. The decision granted consequential benefits to the appellant, overturning the initial disallowance and penalty imposed.

---

---

Issues involved:
Entitlement to Cenvat credit on cement used in the foundation of machineries erected for manufacturing taxable products.

Analysis:
The appellant, a sugar manufacturer, took Cenvat credit on inputs used in machinery foundation. The dispute arose when a Show Cause Notice proposed disallowing the credit on cement used in machinery foundation. The appellant argued that cement was crucial for machinery operation and production of dutiable goods. The dispute led to an Order-in-Original confirming the disallowance and imposing a penalty. The Commissioner (Appeals) upheld the decision, citing a Rajasthan High Court ruling. The appellant appealed, arguing that the ruling was under outdated Cenvat Credit Rules, not applicable to the current rules in place.

The appellant contended that under the new Cenvat Credit Rules, they were entitled to credit on cement used within the factory for machinery erection. Rule 2(k) defined credit as goods used in manufacturing final products, including those used indirectly or for other purposes within the factory. The appellant cited a Karnataka High Court ruling supporting credit on inputs used in fabrication of capital goods. Additionally, a Madras High Court ruling deemed cement and steel used in machinery foundation eligible as inputs.

The Assistant Commissioner supported the initial decision. The Tribunal found the Commissioner erred in relying on an outdated ruling. Under the current rules, cement and steel used in machinery erection were considered inputs, even if not directly used in final product manufacture. As cement was crucial for machinery operation and dutiable goods production, the appellant was entitled to Cenvat credit. The appeal was allowed, setting aside the impugned order and granting consequential benefits to the appellant.

---