2013 (10) TMI 195 - HC - Central Excise

CENVAT Credit - Whether Cement used as construction/building material in the mines is eligible as input for the purpose of availment of Cenvat Credit under the provisions of the Cenvat Credit Rules 2002/2004 Held that - The foundation made of cement in our view does not fall under the category of capital goods as defined under Rule 2(b) of the Cenvat Credit Rules 2002 - The item in question i.e. cement also cannot be considered as inputs as per the definition of Explanation II of Rule 2(g) of the Rules 2002 - no Cenvat Credit is available so far as the cement is concerned the foundation made of cement does not fall under the category of capital goods as per the definition clause and since the cement was used in the construction of foundation it cannot be said to be eligible capital goods in terms of Rule 2(b) of the Cenvat Credit Rules 2002 and the cement cannot be said to be inputs in terms of Explanation II of Rule 2(g) of the Rules 2002. The Tribunal has erred in allowing the appeal filed by the respondent-assessee. In our view the Tribunal has committed substantial error of law in allowing the appeal of the respondent-assessee by holding that the assessee is entitled for getting benefit of Cenvat Credit on cement - the foundation cannot be described as capital goods as per Rule 2(b) of the Cenvat Credit Rules 2002 and it cannot be said that the same is used in connection with manufacturing of goods which are further used for the manufacture of the ultimate product - appeal allowed - The order of the Tribunal is set aside and the order of the Commissioner (Appeals) Customs and Central Excise is restored with no order as to costs.

Summary

Issues:
- Eligibility of cement as an input for availing Cenvat Credit under the Cenvat Credit Rules 2002/2004.

Analysis:
The case involved a dispute regarding the eligibility of cement as an input for availing Cenvat Credit under the Cenvat Credit Rules 2002/2004. The respondent-assessee, engaged in the manufacture of metal concentrates, had availed Cenvat Credit on cement used in mining operations. The Revenue contended that cement, being a construction material, was not eligible for Cenvat Credit under Rule 2(g) of the Rules of 2002. The matter was initially decided against the assessee by the Assistant Commissioner and the Appellate Authority. However, the Tribunal allowed the appeal based on a decision of the Apex court in a similar case. The High Court formulated the substantial question of law regarding the eligibility of cement as an input for Cenvat Credit.

The High Court referred to its previous judgments, including those in Union of India Vs. Hindustan Zinc Limited, where it was held that cement used as a building material for construction cannot be considered an input for manufacturing the final product. The Court emphasized that cement does not fall under the category of 'capital goods' or 'inputs' as defined in the Rules of 2002. The Court reiterated that without cement, the manufacturing of the final product is possible, and hence, cement cannot be considered an integral part of the manufacturing process. The Court concluded that the Tribunal erred in allowing the appeal of the assessee and held that the foundation made of cement cannot be described as capital goods under the Rules.

In light of the above analysis, the High Court allowed the appeal, setting aside the Tribunal's order and restoring the orders of the Commissioner (Appeals) and Assistant Commissioner. The Court held that the Tribunal had erred in allowing the assessee to claim Cenvat Credit on cement, ruling in favor of the Revenue and against the assessee. The judgment reaffirmed the position that cement used as a building material in mining operations is not eligible for Cenvat Credit under the Cenvat Credit Rules 2002/2004.