2017 (7) TMI 931 - AT - Central Excise

Tribunal allows CENVAT credit for capital goods fabrication, emphasizing functional necessity and transportability.

The Tribunal upheld the Commissioner's decision allowing CENVAT credit on items used for fabrication of capital goods, including those embedded in earth. ... CENVAT credit - MS angles, plates, channels, joists, beams, etc., used for fabrication of supporting structures for the capital goods - Held that: - the impugned order passed by the Commissioner (A) mainly relying upon the judgment of the Karnataka High Court in the case of CCE Vs. SLR Steels Ltd. [2012 (9) TMI 169 - KARNATAKA HIGH COURT] is in accordance with law - it was held that in the case of SLR Steels Ltd., that appellate authority committed a serious error firstly in holding that the storage tank is an immovable property and secondly, on the ground that it cannot be bought and sold in the market, the criteria which is totally unwarranted - appeal dismissed - decided against Revenue. Issues:- Appeal against Commissioner's order allowing CENVAT credit on items used for fabrication of support structures- Eligibility of CENVAT credit on items used for fabrication of hot blast furnace- Whether items used for fabrication of capital goods embedded in earth qualify for CENVAT creditAnalysis:1. Appeal against Commissioner's order allowing CENVAT credit on items used for fabrication of support structures:The Revenue filed appeals against the Commissioner's order allowing three appeals of the assessee against the Orders-in-Original. The appeals pertained to availing irregular CENVAT credit on items like MS angles, plates, channels, joists, beams, etc., used for fabrication of supporting structures for capital goods. The assessee contended that the items were used in the manufacturing of hot blast furnace classifiable under Chapter Heading 84 of CETA, 1985. The Commissioner (A) allowed the appeals of the assessee, setting aside the Orders-in-Original.2. Eligibility of CENVAT credit on items used for fabrication of hot blast furnace:The Revenue argued that the impugned items were used for the fabrication of hot blast furnace embedded in earth, making them immovable property, thereby rendering the CENVAT credit inadmissible. The assessee, on the other hand, maintained that the inputs used for fabrication of capital goods, even if fixed to earth, are eligible for CENVAT credit. They cited various judgments and Circulars to support their position, emphasizing that the hot blast stoves have a separate identity before being fixed to the earth, and are crucial for safe and efficient operation in the steel industry.3. Whether items used for fabrication of capital goods embedded in earth qualify for CENVAT credit:In analyzing the submissions of both parties, the Tribunal referred to the judgment of the Karnataka High Court and the decision in the case of JSW Steels Ltd. The Tribunal upheld the Commissioner's order, emphasizing that the size and nature of the hot blast stoves necessitate their integration and fixing as per technical design, making them movable and transportable if needed. The Tribunal concluded that the impugned order was legally sound, based on precedents and circulars, and dismissed the appeals of the Revenue.In conclusion, the Tribunal's decision affirmed the eligibility of CENVAT credit on items used for fabrication of capital goods, even when embedded in earth, based on the functional requirements and operational efficiency of the manufacturing process, as established by legal precedents and relevant circulars.