2017 (8) TMI 159 - AT - Central Excise

CESTAT AHMEDABAD: CENVAT credit allowed for construction materials. Ruling on limitation issue.

M/s Vardhman Acrylics Ltd. Versus C.C.E. & S.T. Surat-II

The Appellate Tribunal CESTAT AHMEDABAD allowed the CENVAT credit on TMT Bars and Cements used for constructing storage tanks, citing the user test ... CENVAT credit - inputs - Ms. Angles, Channels, and Beams, TMT Bars, Cements etc., used in the fabrication of storage tanks as well as structures which support capital goods - Held that: - the issue has been recently considered by the Principal Bench at Delhi in Singhal Enterprises Pvt. Ltd's case [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit. Time limitation - Held that: - the demand is barred by limitation, since on the very same issue, responding to the objection raised by the Audit, the appellant way back in the year 2007 submitted that these items are eligible to CENVAT credit and no demand notice was issued to the appellant for recovery of the credit. Appeal allowed - decided in favor of appellant. Issues:- Eligibility of CENVAT credit on TMT Bars and Cements used for construction of storage tanks.- Applicability of the definition of Input under Rule 2(k) of Cenvat Credit Rules, 2002.- Barred by limitation issue due to previous objection raised during audit.Eligibility of CENVAT Credit on TMT Bars and Cements:The appellant, a manufacturer of excisable goods, availed CENVAT credit on inputs like TMT Bars and Cements for constructing storage tanks. The dispute arose when a demand notice was issued, challenging the eligibility of these items for credit. The appellant argued that these materials were essential for the fabrication of storage tanks and their foundations, thus making them eligible for credit under Rule 2(k) of the Cenvat Credit Rules, 2002. The appellant cited various court decisions supporting their claim, emphasizing that the structural items used in the fabrication of support structures for capital goods should be considered as parts of relevant machines, falling within the ambit of Capital Goods as per Rule 2(a) of the Cenvat Credit Rules. The Tribunal analyzed the user test principle and the precedents set by different High Courts and the Supreme Court, ultimately allowing the CENVAT credit on the disputed items.Applicability of the Definition of Input:The central issue revolved around whether TMT Bars and Cements qualified as inputs under Rule 2(k) of the Cenvat Credit Rules, 2002. The appellant contended that these materials were crucial for the construction of storage tanks, making them eligible for credit. The Tribunal considered various legal precedents and the user test principle to determine that the structural items used in the fabrication of support structures for capital goods should be considered as parts of relevant machines, falling within the definition of Capital Goods under Rule 2(a) of the Cenvat Credit Rules. This analysis led to the conclusion that the disputed items were indeed eligible for CENVAT credit.Barred by Limitation Issue:Another crucial aspect of the case was the limitation issue. The appellant argued that the demand for recovery of CENVAT credit was barred by limitation since a similar objection had been raised during an audit in 2007, to which the appellant had responded by asserting the eligibility of the items for credit. As no demand notice was issued at that time, the appellant contended that the current demand was unjustified. The Tribunal agreed with this argument, setting aside the impugned order and allowing the appeal with consequential relief, if any, as per the law.In conclusion, the Appellate Tribunal CESTAT AHMEDABAD, in a detailed analysis, allowed the CENVAT credit on TMT Bars and Cements used for construction of storage tanks, based on the user test principle and legal precedents. The Tribunal also considered the limitation issue, ruling in favor of the appellant due to the lack of a demand notice following the previous objection raised during an audit.