CENVAT Credit allowed on capital goods procured under separate contract despite handover to contractor for installation

CESTAT Kolkata allowed the appeal where CENVAT Credit on capital goods was denied to the assessee. The tribunal held that since the capital goods were procured by the appellant under a separate contract and remained their property throughout, despite being handed over to a contractor for installation, the appellant was entitled to CENVAT Credit. The goods were ultimately used in manufacturing final products. The denial of credit was unsustainable, and penalties imposed were set aside as the credit was correctly taken.

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Issues:
Entitlement to CENVAT Credit on capital goods.

Analysis:
The case involved the appellant, a company engaged in the production of iron ore concentrate and fines, commissioning a new material handling system through various contracts with another company, L&T. The Revenue alleged denial of CENVAT Credit on capital goods supplied by L&T, as L&T opted for service tax payment under a works contract service where CENVAT Credit on inputs was restricted. The impugned order denied the CENVAT Credit and imposed penalties, leading to the appeal.

The appellant argued that denial of CENVAT Credit solely due to works contractor restrictions was not valid, citing precedents like Commissioner of C.Ex. v. Gujrat Ambuja Cement Ltd. affirmed by the Supreme Court. They also referenced cases like Commissioner, Central Excise & CGST, Udaipur v. Rajasthan Spinning & Weaving Mills Ltd. and Commissioner of C.Ex. & CGST, Udaipur v. Hindustan Zinc Ltd. to support their stance. The appellant contended that the extended period of limitation was not applicable.

In contrast, the Revenue supported the impugned order during the hearing. The Tribunal examined whether the appellants were entitled to CENVAT Credit on capital goods. It was noted that the goods procured by the appellant became their property and were handed over to L&T for installation and commissioning. L&T paid Service Tax without availing CENVAT Credit on inputs, indicating the goods remained the appellant's property during the relevant period.

The Tribunal referred to the case of Commissioner of C.Ex. v. Gujrat Ambuja Cement Ltd. and the Tribunal's decision in Rajasthan Spinning & Weaving Mills Ltd., highlighting that the installed capital goods were used in manufacturing the final product. Additionally, the case of Commissioner of C.Ex., Jalandhar v. International Tractor Ltd. was cited, affirming the entitlement to modvat credit for duty-paid inputs and parts. Consequently, the Tribunal held that the appellant correctly availed CENVAT Credit on capital goods, leading to the setting aside of penalties imposed on the appellants.

In conclusion, the impugned order was set aside, and the appeals were allowed with any consequential relief.

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