2017 (1) TMI 1077 - AT - Central Excise

Tribunal Allows CENVAT Credit for Iron & Steel in Tech Structures

The Tribunal overturned the denial of CENVAT credit on iron and steel items used in the fabrication of technological structures, emphasizing the essential ... CENVAT credit - MS Plates, Angles, Bars, HR Plates, etc - manufacture of Sponge Iron - Held that: - The credit availed is limited only on the MS items used for fabricating capital goods and the supporting structures of the capital goods. From the photographs it is clear that without the supporting structures, the Kiln, Conveyor, Pollution Control equipments cannot be erected and cannot be put into function - reliance placed in the case of Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA], where it was held that credit on MS items used for fabricating support structure of machinery and equipment is eligible - the denial of credit is unjustified - appeal allowed - decided in favor of appellant. Issues: Denial of CENVAT credit on iron and steel items used in fabrication of technological structures.Analysis:The appellants, engaged in manufacturing Sponge Iron, availed CENVAT credit on various inputs, input services, and capital goods, including MS Plates, HR Coils, Angles, Bars, etc., used in the fabrication of capital goods like Kiln, Conveyor Systems, and Pollution Control Equipment. The department issued Show Cause Notices alleging irregular credit availment, leading to confirmation of demand, interest, and penalties by the original authority. The Commissioner (Appeals) partially allowed credit but disallowed specific amounts in three appeals. The appellants contended that the denied credit pertained to MS items used for supporting structures essential for erecting and functioning of capital goods, not for civil constructions. They provided a detailed explanation supported by a chartered engineer certificate and photographs to establish the usage of MS items exclusively for fabricating capital goods' supporting structures, not civil foundations. The appellants argued that without these supporting structures, the machinery could not be erected or function, citing legal precedents to support their claim.The Department, represented by Shri. P.S. Reddy and Shri. Nagraj Naik, opposed the appellant's arguments, asserting that the Commissioner (Appeals) rightly denied credit for MS items used in supporting structures, as they were not integral components of the capital goods but merely structural supports. They emphasized that credit was allowed for structural items mentioned in the chartered engineer's certificate, excluding MS items for supporting structures. The Department's stance was that the denied credit for MS items used in support structures was justified, as these were not part of the capital goods' structure.After considering both sides and reviewing the evidence, the Tribunal found merit in the appellant's contentions. The Tribunal noted that the appellants had provided a detailed reply countering the allegations, explaining the purpose of MS items in fabricating capital goods' supporting structures. The Tribunal observed that the MS items were used exclusively for supporting structures, as evidenced by the chartered engineer certificate and photographs submitted. Referring to legal precedents, including a decision by the Honorable Madras High Court, the Tribunal concluded that denial of credit on MS items used for fabricating support structures of machinery and equipment was unjustified. Citing relevant legal principles, the Tribunal set aside the impugned orders disallowing credit and allowed the appeals with consequential reliefs, if any.In summary, the Tribunal's judgment overturned the denial of CENVAT credit on iron and steel items used in the fabrication of technological structures, emphasizing the essential role of supporting structures for capital goods and aligning with established legal precedents supporting credit eligibility for such items.