Whether Credit is available in respect ofHR Sheets and Steel Plates used for maintenance of storage tanks?

PJ/CASE LAW/2016-17/3045

Case : HINDUSTAN PETROLEUM CORPN. LTD. Vs C.C.E., C. & S.T., VISAKHAPATNAM-I

Citation :2015 (317) E.L.T. 134 (Tri. - Bang.)

Brief Facts :Cenvat credit of duty paid on HR Sheets and Steel Plates used for maintenance of storage tanks by the appellant has been denied and credit utilized has been demanded with interest and penalty also has been imposed in the impugned orders.

Appellant’s Contention:The learned counsel submits that the issue is squarely covered by the decision of this Tribunal in the case of Cement Corporation of India v. CCE, Hyderabad [2013 (297)E.L.T. 279 (Tri. - Bang.)] wherein this Tribunal took a decision that HR Plates/Sheets used for repair and maintenance would be eligible for Cenvat credit as inputs. Further he also submits that in the definition of ‘capital goods’ also storage tank is specifically covered. Therefore the Steel Plates and Sheets etc. used for repair and maintenance of storage tanks has to be held as admissible since the storage tank is defined as capital goods. Therefore Sheets and Plates used for maintenance after conversion into parts of storage tanks would also have to be treated as inputs.

Respondent’s Contention:Learned AR submits that lower authorities have relied upon the Board’s circular issued taking note of the decision of the Hon’ble Supreme Court in the case of Saraswati Sugar Mills v. CCE, Delhi-III [2011 (270)E.L.T. 465 (S.C.)] and the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. v. CCE, Raipur [2010 (253)E.L.T. 440 (Tri.-LB)]. In the Circular Board had clarified that the Steel Plates, Sheets etc. used for repair and maintenance would not be eligible for Cenvat credit.

Reasoning of Judgement:They find that the decision of the Tribunal cited by the learned counsel is applicable to the facts of this case also. Paragraph 3 of the decision is reproduced below for better appreciation.
“We have given careful consideration to the submissions. It is true that the appellant was consistently claiming Cenvat credit on the aforesaid items by treating them as capital goods falling under Rule 2(a) (A) ibid. They took the credit in question in RG 23C Part II, 50% thereof in one financial year and the rest in a subsequent year. At no stage before did they make any alternative claim. Nevertheless, they have made such a claim under Rule 2(k) before this Tribunal. In view of a Larger Bench decision of this Tribunal vide Commissioner v. Modi Rubber Ltd. [2000 (119)E.L.T. 197 (Tri.-L.B)], this alternative plea is, prima facie, liable to be entertained. Accordingly, we have considered the plea. The steel items in question are claimed to have been used for repairs/maintenance of capital goods by way of replacement of old/worn out parts/components of such capital goods. This factual plea is to be seen throughout the records. However, the learned Commissioner has proceeded on the premise that the steel items were used for fabricating/manufacturing of capital goods. If this finding is presumed to be correct for a moment, then there is a prima facie case for holding that the steel items were used in the manufacture of capital goods and, hence, by virtue of the aforesaid Explanation to the definition given under Rule 2(k), such steel items could be considered as “inputs”. In this prima facie view of the matter, we have found a good case for waiver and stay. The Hon’ble High Court in the cited case held that manufacture of capital goods was different from repairs or maintenance of capital goods and that CENVAT credit could not be claimed under Rule 2(k) in respect of welding electrodes used for repairs. Welding electrodes used for repairs/maintenance of capital goods never become part of such capital goods. On the other hand, the steel items used for replacement of worn out parts of capital goods go to become part of the capital goods. This distinction has to be borne in mind in the context of examining whether the Hon’ble High Court’s decision is applicable. Prima facie, the decision is inapplicable. We have also heard the plea of limitation but, as we have already found prima facie case on merits in favour of the appellant, we need not discuss further. In the result, there will be waiver of pre-deposit and stay of recovery as prayed for.”
From the para reproduced above it becomes quite clear that when HR Steel Sheets, Plates etc. are used for repair and maintenance within the factory they would be eligible for credit. In this case there is an added factor to support the eligibility for the credit in the sense that the same have been used for repair and maintenance of storage tank which is specifically covered under the definition of ‘capital goods’.
The issue is no longer res integra and is covered by the precedent decision. Therefore it would not be necessary or appropriate to postpone the final decision to a later stage by granting stay. Accordingly both the appeals are allowed with consequential relief, if any, to the appellants.

Decision: Appeal Allowed

Comment: The gist of the case is that the credit on HR Sheets and Steel plates used for maintenance of storage tanks is eligible as storage tank is covered under definition of capital goods.

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PJ/CASE LAW/2016-17/3045

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