2026 (3) TMI 101 - AT - Central Excise

Cenvat credit for specially designed vehicles upheld; credit allowed and related demand, interest and penalty cancelled.

Cenvat credit on a Transit Concrete Mixer and an FB Tipper was held admissible as goods integrally and essentially connected to the manufacture and ... Denial of Cenvat credit on FB Tipper used in transportation of sand to the RMC plant for manufacture of Ready Mix Concrete (RMC) and denial of credit on Concrete Mixer used for transportation of Ready Mix Concrete from RMC plant to the place of construction by the service provider - availing the benefit of Cenvat credit of the duty paid on inputs, capital goods and input services as per the Cenvat Credit Rules, 2004 - penalty imposed under Section 11AC. Eligibility for Cenvat credit on transit concrete mixers and tippers - integral and essential connection to manufacture - Cenvat credit claimed on the Transit Concrete Mixer and FB Tipper is admissible. - HELD THAT: - The Tribunal examined whether the subject vehicles were excluded from credit under the definitions of 'capital goods' and 'inputs' in the Cenvat Credit Rules and considered purposive clarifications in Circular No. 943/4/2011-CX and judicial authorities holding that specialized vehicles integrally connected to the manufacture and delivery of the final product are eligible for credit. Applying the established ratio that goods which are essential and integrally connected with the manufacturing process (including transportation where specialised vehicles are necessary to preserve or deliver the final product) are entitled to credit, and having regard to precedents treating tippers/dumpers and mixers as integrally connected to manufacture, the Tribunal held that the Transit Concrete Mixer and FB Tipper used in the production and supply chain of Ready Mix Concrete were eligible for the Cenvat credit claimed for the period in question. Cenvat credit availed on Transit Concrete Mixer and FB Tipper for March 2011 to April 2011 is admissible. Penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 - The demand, interest and penalty confirmed in respect of the irregular credit are unsustainable in view of the admissibility of the credit. - HELD THAT: - The adjudicating authority had confirmed demand, interest and penalty on the ground that credit was irregular and the appellant had not discharged the burden of proof. Having held that the credit on the subject vehicles is admissible because they are essential and integrally connected to manufacture/supply of RMC, the Tribunal found that the impugned demand, interest and penalty could not be sustained. The Tribunal noted earlier orders and clarifications relied upon by the appellant and concluded that the impugned findings imposing financial consequences were not tenable. The demand, interest and penalty imposed in the impugned order are set aside. Final Conclusion: The impugned order is set aside; the appeal is allowed, Cenvat credit on the Transit Concrete Mixer and FB Tipper for March 2011 to April 2011 is permitted and the demand, interest and penalty arising from the adjudication are quashed, with consequential relief as per law. Issues: (i) Whether Cenvat credit availed on Transit Concrete Mixer and FB Tipper is admissible to the appellant as goods integrally connected to manufacture of Ready Mix Concrete and therefore allowable under the Cenvat Credit Rules, 2004; and whether consequential demand, interest and penalty confirmed against the appellant are sustainable.Analysis: The Tribunal examined the statutory definitions in Rule 2(a) and Rule 2(k) of the Cenvat Credit Rules, 2004 and the surrounding authorities and administrative guidance. The Court considered Circular No. 943/4/2011-CX dated 29.04.2011 which directs that goods used in or in relation to manufacture are to be construed liberally so long as they are not shown to have 'no relationship whatsoever' with manufacture. The Tribunal analysed precedents recognising specially designed vehicles and equipment (including decisions on dumpers, tippers and transit mixers) as integrally connected to the manufacture process where such equipment is necessary to preserve or bring the final product to the buyer in marketable condition. The Tribunal also noted earlier judicial and tribunal decisions (including High Court and Tribunal precedents) holding that vehicles or their spares used in the manufacturing/processing chain may qualify for credit where they are integrally connected to production or the delivery of the dutiable product. The burden of proof under Rule 9(5) of the Cenvat Credit Rules was considered, but on facts the Tribunal found the Transit Concrete Mixer and FB Tipper were specially designed and essential for manufacture and delivery of Ready Mix Concrete and therefore eligible for cenvat credit. Having found the credit admissible, the Tribunal held that the demand, interest and penalty confirmed in the impugned order were unsustainable in the circumstances.Conclusion: The Cenvat credit availed on the Transit Concrete Mixer and FB Tipper is admissible to the appellant as goods integrally and essentially connected to the manufacture and delivery of Ready Mix Concrete; the demand, interest and penalty confirmed by the adjudicating and appellate authorities are set aside and the appeal is allowed with consequential relief in accordance with law.