CENVAT credit allowed on capital goods used in factory expansion despite becoming immovable after installation

The CESTAT Bangalore allowed the appeal regarding CENVAT credit eligibility on capital goods used in plant fabrication/erection under Phase III expansion project. The Revenue had denied credit claiming items became immovable after installation, making them non-excisable. The Tribunal held that items qualifying as capital goods under Rule 2(a) of CENVAT Credit Rules, 2004 and used in the manufacturer's factory are eligible for credit regardless of whether they become immovable after installation. The decision followed precedents from Chandigarh Bench and Karnataka HC, emphasizing that credit availability depends on items being "used in factory" rather than "used in manufacture."

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Issues Involved:

1. Admissibility of cenvat credit on various items used in the manufacture of sub-plants in Phase III expansion project.
2. Justification of invocation of extended period of limitation.

Summary:

Issue 1: Admissibility of Cenvat Credit

The appellants, engaged in the manufacture and clearance of petroleum products, availed cenvat credit on various items such as down comers, tray decks, separator with lifting beam (frame) assembly, catalyst outlet screen, centrifugal pumps, tools and tackles, regenerator internal steam, gas compressor, tandem dry gas seal, vertical storage container of ST rotor, rotor assembly, turbine assembly, control valve, industrial valves, pipes, tubes, pipe fittings, vales, flanges, heat exchanger, earthing control cables, flame proof lighting, foundation template, etc., used in the Phase III expansion project. The Commissioner denied the cenvat credit on the grounds that these items, after being used in the erection and installation of sub-plants, became immovable property and thus did not qualify as capital goods u/s 2(a) of the Cenvat Credit Rules, 2004.

The Tribunal found that the definition of 'capital goods' u/s 2(a) of the Cenvat Credit Rules, 2004, includes goods falling under Chapter 84, 85, 90, and pipes and pipe fittings, and that these items, when used in the factory, qualify for cenvat credit. The Tribunal noted that the judgment of the Larger Bench in Vandana Global Ltd. was set aside by the Hon'ble Chhattisgarh High Court, which followed the judgments of the Hon'ble Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. and the Hon'ble Madras High Court in Thiru Arooran Sugars. The Tribunal further referenced the case of Indian Oil Corporation Ltd. Vs. Commissioner, where it was held that capital goods used in the factory, even if they become part of an immovable property, are eligible for cenvat credit.

Issue 2: Invocation of Extended Period of Limitation

The appellant contended that the demand for the period from April 2010 to March 2014 was barred by limitation. They argued that there was no suppression of facts or intent to evade duty, as they had availed the cenvat credit in accordance with settled legal principles and had not concealed any information from the Department. The Tribunal agreed with the appellant, noting that in the absence of evidence of suppression or intent to evade duty, the extended period of limitation was not applicable.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, to the appellant. The Tribunal held that the items in question qualify as capital goods u/s 2(a) of the Cenvat Credit Rules, 2004, and that the invocation of the extended period of limitation was unjustified.

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