Cenvat Credit on Individual Items cannot be Denied merely because it was used for Fabrication of Immovable Property: CESTAT [Read Order]

The Bangalore  Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that Cenvat Credit  on individual items could not be denied merely because it was used for the fabrication of immovable property

The Appellant Mangalore Refinery & Petrochemicals Ltd.engaged in the manufacture and clearance of petroleum products. They availed cenvat credit on inputs, input services and capital goods used in the manufacture of their final products.

Based on audit of their records, it is alleged that the appellant had availed cenvat credit on capital goods on various items. Accordingly the department alleged that the said goods do not satisfy the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004,  Therefore a show-cause notice was issued to them on 06/05/2015 for recovery of the said credit along with interest and penalty.

On adjudication, the demand was reduced by Rs.2,92,23,646/- being part of the earlier order dt. 03/02/2014 and Rs.173,76,67,082/- confirmed with interest and penalty. Aggrieved by the order the appellant filed appeal before the tribunal.

Rajesh Chander Kumar, Counsel for appellant submitted that the  cenvat credit availed on various capital goods on its receipt into the factory were in manufactured condition and on the respective Central Excise invoices, the declared excise tariff heading mentioned are under Chapter 84, 85, 90 and 73 pipes and pipe fittings, as applicable.

Further submitted that these goods were then incorporated by attaching / assembling with pipes and pipe fittings to partake processing of refining of the crude petroleum in their factory premises.

They also satisfy the test for availing the credit as ‘capital goods’ under Rule 2(a) of the CCR, 2004 is that the goods which are defined under Rule 2(a) in terms of the classification and nomenclature are used in the factory for manufacture of the final products, it does not include any equipment, appliance which are used in the office premises.

PRV Ramanan, Counsel for the department, supported the order of lower authorities.

Accordingly the appellant’s own case, this Tribunal viewed that  because the items are used for fabrication in the erection of storage tank which affixed to earth and become immovable property, cenvat credit availed on individual items cannot be denied being capital goods as defined under Rule 2(a) of the CCR, 2004 .

A Two-Member Bench comprising Dr. D.M. Misra (Judicial) and R Bhagya Devi (Technical Member)  set aside the order of lower authorities   and allowed the appeal filed by the appellant.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates