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CX – Paints used in maintenance of storage tank are eligible inputs for purpose of CENVAT credit: CESTAT

2019-TIOL-2017-CESTAT-HYD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, HYDERABAD
SINGLE MEMBER BENCH
COURT NO. I

Excise Appeal No. 448 of 2012

Arising out of Order-in-Appeal No. 31/2011-(V-II)CE, Dated: 22.11.2011
Passed by Commissioner of Central Excise, Customs and Service Tax, Visakhapatnam

Date of Hearing: 15.04.2019
Date of Decision: 15.04.2019

UNIVERSAL BIOFUELS PVT LTD
PLOT NO 36, INDUSTRIAL PARK, VAKALAPUDI
APSP CAMP, KAKINADA-533005, ANDHRA PRADESH

Vs

COMMISSIONER OF CENTRAL EXCISE CUSTOMS AND SERVICE TAX & CUSTOMS
CENTRAL EXCISE BUILDING, PORT AREA,
VISAKHAPATNAM – 530035, ANDHRA PRADESH

Appellant Rep by: Shri Rahul Binani, CA
Respondent Rep by: Shri C Mallikharjun Reddy, Superintendent AR

CORAM: P Venkata Subba Rao, Member (T)

CX – The only point of dispute is whether the assessee is entitled to input CENVAT Credit during the period November 2008 to August 2009 on the paints used by them to maintain their storage – The only reason the department sought to deny CENVAT Credit on the paints in question was that they are used in maintenance of storage tank and therefore cannot be considered as inputs, in terms of CBEC instruction dated 08.07.2010 – This instruction was issued in the light of judgment of Larger Bench of CESTAT in the case of Vandana Global Limited – 2010-TIOL-624-CESTAT-DEL-LB which itself has subsequently been set aside by High Court of Chattisgarh – A plain reading of definition of ‘input’ in Rule 2(k) shows that paints are specifically included in the definition – Accordingly, assessee is entitled to CENVAT Credit on the paints used: CESTAT

Appeal allowed

Case laws cited:

Vandana Global Limited vs. CCE Raipur – 2010-TIOL-624-CESTAT-DEL-LB… Para 1

Vandana Global Limited – 2017-TIOL-2853-HC-CHATTISGARH-CX… Para 2

FINAL ORDER NO. A/30472/2019

Per: P Venkata Subba Rao:

1. This appeal is filed against Order-in-Appeal No. 31/2011-(VII) CE, dated 22.11.2011. After hearing both sides and perusing the records, it emerges that the only point of dispute is whether the appellant is entitled to input CENVAT Credit amounting to Rs.3,32,862/- during the period November 2008 to August 2009 on the paints used by them to maintain their storage or not. The appellant is a manufacturer of bio-fuels which are stored in storage tanks which need to be painted. The department is of the opinion that no CENVAT credit is admissible on such paints in view of CBEC instruction No. 267/11/2010-CX, dated 08.07.2010 in which it was held that the credit shall not be admissible on inputs used for repair and maintenance of capital goods. This instruction by CBEC was issued in view of the Larger Bench decision of CESTAT in the case of Vandana Global Limited vs. CCE Raipur [2010(253)E.L.T. 440 (Tri.-LB) = 2010-TIOL-624-CESTAT-DEL-LB.

2. Ld. Chartered accountant for the appellant submits that the order of the Larger Bench in the case of Vandana Global Limited has already been set aside by Hon’ble High Court of Chattisgarh as reported at [2018(16)G.S.T.L. 462 (Chattisgarh) = 2017-TIOL-2853-HC-CHATTISGARH-CX. Therefore, the order of CBEC issued based on the judgment of Larger Bench of CESTAT is no longer valid. On merits, he argues that the definition of inputs under Rule 2(k) of CCR 2004 specifically includes “goods used as paint within the factory of production”. Therefore, they are entitled to credit on the basis of this definition itself. He further argues that as far as their plant is concerned, the paints which were used are MC Clear paints, Mio Premier paints, Nickel grey paint, PU black paint which are not ordinary decorative paints but are industrial paints designed to maintain the life of storage tank as well as the appropriate temperature in the tank which stores finished products. Therefore, it will be impossible to manufacture their final product unless these paints are used. He also argues that the demand is time barred and extended period of limitation cannot be invoked. They have been filing all details along with their ER returns and therefore the usage of paint was within the knowledge of the department. To summarize, he argues that (a) they are liable for CENVAT Credit as paints were included specifically in the definition of inputs in Rule 2(k) of CCR 2004 (b) the paints in question were specifically required for manufacture of their final products because maintenance of temperature by using paints is essential and (c) the demand is time barred as all information was provided to the Department.

3. Ld. DR reiterates the findings of the lower authority.

4. After considering the submissions on both sides, I find that the only reason the department sought to deny CENVAT Credit on the paints in question was that they are used in maintenance of storage tank and therefore cannot be considered as inputs, in terms of CBEC instruction dated 08.07.2010 (supra). This instruction was issued in the light of the judgment of the Larger Bench of CESTAT in the case of Vandana Global Limited which itself has subsequently been set aside by Hon’ble High Court of Chattisgarh. A plain reading of the definition of ‘input’ in Rule 2(k) shows that paints are specifically included in the definition. Accordingly, I find that the appellant is entitled to CENVAT Credit on the paints used.

5. The appeal is allowed and the impugned order is set aside.

(Dictated and pronounced in open court)

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