2013 (8) TMI 391 - AT - Central Excise

Tribunal denies Cenvat credit for iron and steel as capital goods under Chapter 72

The Tribunal ruled in favor of the Revenue, denying the eligibility of Cenvat credit for iron and steel items under Chapter 72 as capital goods. The ... Cenvat Credit on iron and steel items like angles, channel, joist, bar, plates, sheets and coil falling under Chapter heading 72 under the category of capital goods - Appellant are engaged in the manufacture of sugar and molasses falling under Chapter 17 of the Central Excise tariff – Capital items which are in the nature of construction material and are not used in or in relation to the manufacture of final products i.e. Sugar and molasses – Held that:- Issue in relation to the Cenvat credit in respect of structural steel items like angles, channels sheets and joists etc. came for decision before the Larger Bench in the case of Vandana Global reported in [2010 (257) ELT 440 (Tri-LB - Del] in which it was held that these items are used for laying foundation and structural support which are neither the machinery items nor components or parts of plant and machinery and therefore are not covered in the definition of capital goods – Relying upon the decision in the case of Vandana Global, Credit of duty paid on these items used in foundation and supporting structures is not available to the assessee – Decided in favor of Revenue. Issues:Eligibility of Cenvat credit on iron and steel items under Chapter 72 of Central Excise Rules as capital goods.Analysis:The appeal was filed by the Commissioner of Central Excise against an order-in-appeal passed by the Commissioner of Central Excise (Appeals) Bhopal. The case involved M/s. Mahakaushal Sugar & Power Industries Ltd. availing Cenvat credit on iron and steel items like angles, channel, joist, bar, plates, sheets, and coil falling under Chapter 72 of the Central Excise tariff. The department alleged that these items were wrongly considered as capital goods and used in the manufacture of sugar and molasses. A show cause notice was issued, leading to an original authority disallowing the Cenvat credit and imposing a penalty. The respondents appealed, and the Commissioner (Appeals) Bhopal allowed the appeal, prompting the Revenue to challenge the decision in the Tribunal.The Revenue argued that the disputed items did not qualify as capital goods under the Cenvat Credit Rules, citing a Tribunal decision in the case of Hindustan Zinc. They contended that the items were not eligible for Cenvat credit, referencing a Larger Bench decision in the case of Vandana Global. On the other hand, the respondents supported the order in appeal, stating that the impugned goods met the definition of capital goods based on the Hindustan Zinc case and various provisions of the Cenvat Credit Rules.Upon review, the Tribunal found that the issue revolved around the eligibility of Cenvat credit for iron and steel items falling under Chapter 72. Referring to the Vandana Global case, the Tribunal concluded that items like angles, channels, sheets, and joists were used for foundation and structural support, not as machinery or components of plant and machinery. Therefore, these items did not qualify as capital goods, and the Cenvat credit was not available to the assessee. The Tribunal set aside the order in appeal and allowed the Revenue's appeal.In conclusion, the Tribunal ruled in favor of the Revenue, denying the eligibility of Cenvat credit for the disputed iron and steel items, based on the decision of the Larger Bench in the Vandana Global case.