Tribunal allows Cenvat Credit on mixed-use goods, denies credit on unsupported construction services.

The Tribunal allowed the appeal in favor of the appellant concerning the denial of Cenvat Credit on capital goods used for manufacturing both dutiable and exempted goods. The Tribunal held that the goods were used for a mix of dutiable and exempted products, justifying the availment of credit. However, the denial of Cenvat Credit on input services for construction activities was upheld as the appellant failed to provide adequate support for the claim, leading to the liability to pay/reverse the credit on those services.

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Issues:
- Availment of Cenvat Credit on capital goods used for manufacturing exempted goods
- Availment of Cenvat Credit on input services used for construction activities

Analysis:

Issue 1: Availment of Cenvat Credit on capital goods used for manufacturing exempted goods

The appellant, engaged in manufacturing excisable goods, availed Cenvat Credit on capital goods used in the manufacture of exempted goods. The central excise officers observed this during an audit and initiated proceedings against the appellant. The appellant argued that the capital goods were used for both dutiable and exempted goods, and the denaturing process made the goods dutiable. The Tribunal noted that denatured spirit manufactured by the appellant is dutiable, while rectified spirit is non-excisable and used captively for dutiable products. The storage tanks storing Extra Natural Alcohol were used for denaturing, making them not exclusively for exempted goods. The Tribunal held that denial of Cenvat Credit on capital goods was unjustified as the goods were used for both dutiable and exempted products, such as DDHS and Barli, which emerged during alcohol manufacturing.

Issue 2: Availment of Cenvat Credit on input services used for construction activities

The appellant also availed Cenvat Credit on input services used for construction activities. The Tribunal noted that the appellant failed to provide sufficient arguments or grounds to support this claim. As a result, the impugned order denying the Cenvat benefit on input services was upheld. The Tribunal found the original order confirming the demand on this count to be sustainable. Therefore, the appellant was held liable to pay/reverse the Cenvat Credit on input services used for construction activities.

In conclusion, the Tribunal set aside the impugned order denying Cenvat Credit on capital goods but upheld the decision regarding Cenvat Credit on input services for construction activities. The appeal was allowed in favor of the appellant regarding the capital goods issue but not for the input services matter.

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