2013 (5) TMI 403 - AT - Central Excise

Tribunal allows appeal on capital goods classification under CENVAT Credit Rules

The Tribunal concluded that the items in question, including MS Angles, MS Beams, TMT bars, etc., qualified as capital goods under Rule 2(a)(A)(iii) of ... Irregular CENVAT credit on capital goods - MS Angles, MS Beams, MS Channels and TMT bars classifiable under heading 72, 73 and 74 been alleged to be not covered under the definition of capital goods under Rule 2(a) of the said Rules, 2004 & were not used in the manufacture of finished products - demand of CENVAT along with interest and equivalent amount of penalty - Held that:- As decided in assessee's own case [2013 (1) TMI 5 - Madras High Court] CENVAT credit was allowed as these items were used for fabrication of structurals to support machines like crusher, kiln, hoppers, pre-heaters conveyor system etc. and that without these structurals, the machinery could not be erected and could not function as relying on Commissioner of Central Excise Jaipur V. Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] applying the 'user test' following the Jawahar Mills's case [2001 (7) TMI 118 - SUPREME COURT OF INDIA] held that steel plates and M.S.Channels used in the fabrication of chimney would fall within the ambit of 'capital goods' - the assessee was entitled to the relief of MODVAT Credit - against revenue. Issues Involved:1. Whether CENVAT credit availed on MS Angles, MS Beams, MS Channels, TMT bars, Tor rods, etc., is covered within the definition of capital goods under Rule 2(a)(A) of CENVAT Credit Rules, 2004.2. Whether the demand of duty is barred by limitation for the major part of the period involved.Detailed Analysis:1. Definition of Capital Goods under Rule 2(a)(A) of CENVAT Credit Rules, 2004:The primary issue revolves around whether the items in question (MS Angles, MS Beams, MS Channels, TMT bars, Tor rods) qualify as capital goods under Rule 2(a)(A) of the CENVAT Credit Rules, 2004. The appellant argued that these items were used as spares, components, and accessories for the erection of various capital goods integral to the Dry Process Cement Manufacturing Plant, thus falling under Rule 2(a)(A)(iii). The Commissioner had denied the credit on the grounds that these items were structures fixed to the earth and immovable, which was beyond the scope of the show-cause notice.The Tribunal noted that the appellant had established the use of these items for erecting essential machinery like Electrostatic Precipitator, Fly Ash Handling System, and MMD Crusher, which are integral parts of the Dry Process Cement Manufacturing Plant. The Tribunal referenced the Hon'ble Madras High Court's decision in the appellant's own case, which had allowed CENVAT credit for similar items used for fabricating structures to support essential machinery. The Tribunal also cited the Hon'ble Supreme Court's decision in the case of Rajasthan Spinning and Weaving Mills Ltd., which allowed MODVAT credit on similar items used for erecting machinery.The Tribunal concluded that the items in question were indeed used as components or spares for capital goods and thus qualified for CENVAT credit under Rule 2(a)(A)(iii).2. Demand of Duty and Limitation:The appellant contended that the demand of duty was barred by limitation for the major part of the period involved. The learned AR reiterated the findings of the Commissioner, arguing that the items were used for constructing supporting structures, not covered under the definition of capital goods. However, the Tribunal found that the Commissioner's findings on the immovability of the structures were beyond the scope of the show-cause notice.The Tribunal noted that the show-cause notice did not dispute the use of the items for erecting machinery but rather focused on their classification under the tariff headings. The Tribunal found that the appellant had satisfactorily demonstrated the use of these items in the erection of capital goods, thus satisfying the user test.Conclusion:After considering the use of the goods in question and referencing the decisions of the Hon'ble Madras High Court and the Hon'ble Supreme Court, the Tribunal concluded that the items in question qualified as capital goods under Rule 2(a)(A)(iii) of the CENVAT Credit Rules, 2004. The Tribunal set aside the impugned order and allowed the appeal with consequential reliefs, emphasizing that the items were used for erecting essential machinery in the Dry Process Cement Manufacturing Plant and were thus eligible for CENVAT credit.(Pronounced in open court on 08.05.2013)