CENVAT credit on structural steel for machinery support was prima facie denied, while partial pre-deposit relief was allowed

Steel items used to fabricate RCC pillars, beams and other supporting structures for machinery were found, on a prima facie basis, not to qualify as components, parts or accessories of capital goods for CENVAT credit. The Tribunal treated the admitted use of the items in structural supports as inconsistent with a credit claim and considered the larger bench ruling in Vandana Global and the Supreme Court ruling in Saraswathi Sugar Mills as prima facie applicable. On waiver of pre-deposit, disclosure in returns, conflicting precedent during the relevant period, and the later clarification supported a prima facie limitation plea, so only partial relief was granted and the assessee was directed to pre-deposit Rs. 50 lakhs.

---

---

Issues: (i) Whether the steel items used in fabrication of supporting structures could, on a prima facie view, qualify as capital goods for CENVAT credit under the relevant definition. (ii) Whether a case for waiver of pre-deposit was made out on the ground of limitation and bona fide belief.

Issue (i): Whether the steel items used in fabrication of supporting structures could, on a prima facie view, qualify as capital goods for CENVAT credit under the relevant definition.

Analysis: The appellant's first reply admitted that the steel items were used in RCC pillars, beams and other structural supports for machinery. On that factual premise, the Tribunal found the later stand inconsistent and prima facie self-defeating. It held that the Larger Bench ruling in Vandana Global and the Supreme Court's ruling in Saraswathi Sugar Mills were, at least prima facie, applicable, because supporting structures for machinery cannot be treated as components, parts or accessories of capital goods.

Conclusion: The claim to CENVAT credit on the steel items was not accepted prima facie.

Issue (ii): Whether a case for waiver of pre-deposit was made out on the ground of limitation and bona fide belief.

Analysis: The Tribunal noted that the credit had been disclosed in periodical returns together with tariff classifications, that there had been conflicting decisions during part of the relevant period, and that the Larger Bench clarification came only later. On that basis, it accepted that the appellant had made out a prima facie case on limitation for the normal period and that no financial hardship had been pleaded, warranting only partial pre-deposit rather than complete denial of relief.

Conclusion: Partial waiver was granted, with a direction to pre-deposit Rs. 50 lakhs and stay of the balance on compliance.

Final Conclusion: Interim relief was granted only in part, since the credit dispute was not accepted on merits at the prima facie stage, but the assessee obtained waiver and stay for the balance of the dues after making the directed pre-deposit.

Ratio Decidendi: For CENVAT credit on structural steel items used to support machinery, the decisive question is whether the items are themselves components, parts or accessories of capital goods; admitted use in supporting structures militates against such classification, while disclosure in returns and conflicting precedent may justify partial waiver on limitation grounds.

---