2007 (12) TMI 49 - AT - Central Excise

Tribunal grants credit on construction materials, welding supplies, and electricity towers.

The Tribunal allowed the appeal of the assessee, granting credit on cement, steel, roofing materials, and various miscellaneous items. Credit was denied ... Cenvat credit on capital goods/components of plant - definition of 'capital goods' and 'plant' under Cenvat regime - Explanation 2 to Rule 2(g) of CCR, 2002 (inputs used in manufacture of capital goods) - usage in manufacture versus civil construction (immovable constructions as part of plant) - exclusion of Chapter 87 goods from capital goods - admissibility of credit on electricity transmission structures and conductorsCenvat credit on capital goods/components of plant - usage in manufacture versus civil construction (immovable constructions as part of plant) - definition of 'capital goods' and 'plant' under Cenvat regime - Admissibility of Cenvat credit on cement and CTD/TMT bars (TOR steel and other bars) used for foundations, cellars, tunnels, trenches, chimneys and supporting structures - HELD THAT: - The Tribunal held that cement and steel bars used in foundations, cellars, tunnels, trenches, chimneys and supporting/support structures for cold rolling mills and allied plants are components of the plant and therefore eligible for Cenvat credit. The Bench accepted the technical evidence and onsite inspection showing that cellars and related civil works are integral and technically necessary for operation of the CR mill (coolant reservoirs, hydraulic and lubrication systems, filtration, etc.), and that without such specially designed foundations and structures the plant cannot function. The Tribunal also rejected the ground that immovability or inability to dismantle foundations prevents credit, relying on precedents treating buildings/structures integral to plant as eligible and observing that the post1996 Cenvat definition of capital goods is wider. Explanation 2 to Rule 2(g) was held to support admissibility as inputs used in manufacture of capital goods which are further used in the factory. [Paras 5, 6]Credit on cement and CTD/TMT bars used for foundations, cellars, tunnels, trenches, chimneys and supporting structures is admissible.Cenvat credit on capital goods/components of plant - technical necessity of controlled environment for manufacturing - Admissibility of Cenvat credit on roofing materials (GPCC core/trap sheet, blendster and similar roofing items) used over manufacturing lines - HELD THAT: - The Tribunal found that roofing materials installed over mill areas are technically essential to maintain controlled temperature and dustfree conditions required for processes like pickling, cold rolling, galvanizing and coil coating. The protection offered by such roofing directly supports the manufacturing process and the quality of final goods; accordingly these materials are components/parts of the plant and eligible for credit. [Paras 7]Credit on roofing materials used to protect manufacturing processes is admissible.Exclusion of Chapter 87 from capital goods - material handling equipment - Admissibility of Cenvat credit on excavators, tippers and their spares claimed as material handling equipment - HELD THAT: - The Tribunal examined usage and classification. Tippers and spares fall under Chapter 87, which is excluded from capital goods; excavation equipment was shown to have been used for preconstruction leveling with no direct relation to manufacturing. On these bases the Tribunal upheld the Commissioner's denial of credit for excavators, tippers and their spares. [Paras 8]Credit on excavators, tippers and spares is not admissible; denial upheld.Cenvat credit on components, spares and accessories of capital goods - Admissibility of Cenvat credit on other miscellaneous items claimed as parts, components, spares or accessories of capital goods - HELD THAT: - The Tribunal found that the miscellaneous items (as claimed by the assessee) were correctly characterised as components, parts or accessories of capital goods. The Commissioner did not dispute the factual nature of these items but denied credit; the Tribunal held such denial to be factually incorrect and allowed credit. [Paras 9]Credit on the miscellaneous items held to be components/spares/accessories of capital goods is admissible.Cenvat credit on inputs used in manufacture of capital goods (Explanation 2 to Rule 2(g)) - admissibility of credit on welding electrodes/wires - admissibility of credit on electricity transmission structures and conductors - Admissibility of Cenvat credit on welding electrodes/welding wires, aluminium wires/cables/conductors and electricity transmitting tower (transmission structure) - HELD THAT: - Welding electrodes/wires were held to be used in production/processing of components of capital goods rather than merely for repairs or maintenance; accordingly the Triveni Engineering precedent relied upon by revenue was not applicable and Explanation 2 to Rule 2(g) supports credit. Electricity transmitting towers and aluminium conductors installed within the factory to convey captive power were held to be structures/parts of the plant; reliance on Tribunal and Supreme Court precedents treating transmission structures and generator buildings as integral to plant supported admissibility. The revenue's appeals against allowance of credit on these items were rejected. [Paras 10]Credit on welding electrodes/wires, aluminium conductors/cables and electricity transmitting towers is admissible; department's appeal rejected.Final Conclusion: The assessees' appeal is allowed in respect of cement, CTD/TMT bars, roofing materials, welding electrodes/wires, aluminium conductors/cables, electricity transmission structures and various miscellaneous items (held to be components/spares/accessories of capital goods). The assessees' appeal is dismissed insofar as it seeks credit on excavators, tippers and their spares; the department's appeal is rejected. Issues Involved:1. Credit on Cement and Steel2. Credit on Roofing Material3. Credit on Excavator, Tippers, and Spares4. Credit on Other Miscellaneous Items5. Credit on Welding Electrodes/Wires, Aluminum Wires/Cables/Conductors, and Electricity Transmitting TowerDetailed Analysis:1. Credit on Cement and Steel:The primary issue was whether cement and steel bars used for various foundational and structural purposes within the factory qualify for CENVAT credit. The Commissioner denied credit on these items, arguing that foundations made of RCC cannot be dismantled and are part of civil construction, thus not qualifying as components of capital goods. However, the Tribunal found that these materials are used in essential manufacturing processes, such as making foundations for machinery, constructing chimneys, and creating tunnels and trenches for utilities, deeming them integral to the plant's operation. The Tribunal noted that the functional necessity of these structures for the Cold Rolling Mill (CR Mill) was demonstrated during a factory visit. The Tribunal cited various judgments, including the Supreme Court's ruling in Jawahar Mills Ltd., to support the admissibility of credit on these items, concluding that they are components of the plant.2. Credit on Roofing Material:The Commissioner denied credit on roofing materials like GPCC Core/Trap Sheet and Blendster, considering them non-essential. However, the Tribunal found that these materials are crucial for maintaining controlled temperature and dust-free environments necessary for manufacturing processes like Pickling, Cold Rolling, and Galvanizing. The Tribunal emphasized that protective covers are essential to prevent environmental exposure, which could adversely affect the quality of the final products. Therefore, the Tribunal allowed credit on roofing materials.3. Credit on Excavator, Tippers, and Spares:The Tribunal upheld the Commissioner's decision to deny credit on excavators, tippers, and spares. These items were used for activities such as land leveling before production and were classified under Chapter 87, which is excluded from the definition of capital goods. The Tribunal agreed that these items did not directly contribute to the manufacturing process and thus did not qualify for credit.4. Credit on Other Miscellaneous Items:The Tribunal found that the Commissioner incorrectly denied credit on various miscellaneous items, which the appellants claimed were components, parts, or accessories of capital goods. The Tribunal noted that the Commissioner did not dispute the appellants' claims but still denied credit. Therefore, the Tribunal allowed credit on these miscellaneous items, recognizing their role as essential components of capital goods.5. Credit on Welding Electrodes/Wires, Aluminum Wires/Cables/Conductors, and Electricity Transmitting Tower:The Department appealed against the credit allowed on welding electrodes/wires, aluminum wires/cables/conductors, and electricity transmitting towers. The Tribunal found that welding electrodes/wires were used for producing or processing components of capital goods, not for repairs or maintenance, thus qualifying for credit. Aluminum wires/cables/conductors and electricity transmitting towers were deemed essential for transferring power within the factory, aligning with previous judgments like Sanghvi Industries and Jawahar Mills. Therefore, the Tribunal upheld the credit on these items.Conclusion:The Tribunal allowed the appeal of the assessee, granting credit on cement, steel, roofing materials, and various miscellaneous items, while denying credit on excavators, tippers, and spares. The Department's appeal was rejected, affirming the credit on welding electrodes/wires, aluminum wires/cables/conductors, and electricity transmitting towers.