2022 (1) TMI 907 - AT - Central Excise

Ruling: Cement Manufacturer Wins Appeal for CENVAT Credit on Steel Inputs

M/s ACC Ltd. Versus Commissioner of CE & ST (LTU), Mumbai

The Tribunal allowed the appeal by M/s ACC Ltd., a cement manufacturer, challenging the denial of CENVAT credit for steel used in civil structures. The ... CENVAT Credit - inputs/capital goods - fabrication/ creation/ installation of capital goods falling under chapter 84 - essential activity of manufacture or not - HELD THAT:- Tribunal Chennai, in the case of DALMIA CEMENTS (BHARAT) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [2015 (4) TMI 204 - CESTAT CHENNAI] relying upon the decision of Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM COMMISIONERATE VERSUS HINDALCO INDUSTRIES LTD. [2012 (11) TMI 201 - KARNATAKA HIGH COURT], held that credit on cement and steels used in manufacture of storage tank “ Silos” is admissible to the appellant. The Courts and Tribunal have been consistent in holding that inputs which have gone into the manufacture of capital goods are admissible to credit notwithstanding the facts that said capital goods are embedded to the earth. The issue involved in Bharti Airtel is about the credit on Tower parts and pre-fabricated buildings in the case of service provider and as such cannot be applied in the case of credit as inputs used in the manufacture of capital goods which are further used in the manufacture of excisable goods - the appeal stands on merits of the case and that when the appeal survive on merits, other issue like penalty etc. become irrelevant. Appeal allowed. Issues:Challenge to denial of CENVAT credit for steel used in civil structures, classification of items as capital goods or inputs, applicability of Explanation 2 of Rule 2(k) of CENVAT Credit Rules 2004, comparison of judgments favoring and opposing the appellant's claim, relevance of past judgments on similar cases.Analysis:The case involved a challenge by M/s ACC Ltd., a cement manufacturer, against the denial of CENVAT credit for steel used in civil structures, as per CENVAT Credit Rule 2004. The Department alleged a contravention of the rules and issued a show cause notice seeking recovery of credit and penalty. The Commissioner confirmed the notice, leading to the current appeal by the appellants.The appellant argued that the steel was used in constructing storage tanks and chimneys in a Thermal Power Plant, classifiable as capital goods, thus justifying the CENVAT credit claim. They contended that even if some items were not capital goods, they could be treated as inputs under the wide coverage of the definition, especially when used in relation to the manufacture of the final product. The appellant cited various judgments supporting their position, emphasizing the bona fide nature of their actions to avoid penalties.The Department's representative reiterated the findings of the original order and relied on different judgments to support their stance. However, the Tribunal examined the issue in detail, referencing past cases involving cement companies and the use of steel in the manufacture of storage tanks, such as silos. The Tribunal highlighted the importance of the definition of inputs under Rule 2(k) and emphasized that inputs used in the manufacture of capital goods, even if embedded or immovable, are eligible for credit.The Tribunal distinguished the Department's reliance on certain judgments, stating they were not applicable to the current case involving the manufacture of capital goods for excisable products. They concluded that the appeal had merit based on past judgments favoring similar cases involving cement companies, rendering other issues like penalties irrelevant. Ultimately, the appeal was allowed with consequential relief, if any, as per the law.In summary, the judgment addressed the denial of CENVAT credit for steel used in civil structures, analyzed the classification of items as capital goods or inputs under the CENVAT Credit Rules, and considered the applicability of past judgments in similar cases to support the appellant's claim. The Tribunal's decision highlighted the importance of the definition of inputs and the consistent interpretation of rules in allowing credit for inputs used in the manufacture of capital goods, leading to the allowance of the appeal.