Tribunal grants cenvat credit for raw materials used in manufacturing steel products

The Tribunal allowed the appeal, setting aside the Order-in-Original that denied cenvat credit for raw materials used in manufacturing Pig Iron, Sponge Iron, and Steel Billets. Relying on precedents and applying the user test, the Tribunal determined that structural items used in fabricating support structures for capital goods qualified as capital goods under the Cenvat Credit Rules. The appellant was deemed entitled to claim cenvat credit on welding electrodes and structural steel items, overturning the denial by the department.

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Issues:
Appeal against Order-in-Original denying cenvat credit for raw materials used in manufacturing Pig Iron, Sponge Iron, and Steel Billets from February 2006 to March 2008.

Analysis:
The appellant filed an appeal against the denial of cenvat credit by the department for raw materials used in manufacturing Pig Iron, Sponge Iron, and Steel Billets from February 2006 to March 2008. The issue was whether the appellant was entitled to claim cenvat credit on welding electrodes and various structural steel items used in the fabrication of support structures for capital goods. The Tribunal referred to the decision in the case of Singhal Enterprises Pvt. Ltd. vs Commissioner of Customs & Central Excise, Raipur, where the credit on welding electrodes was allowed as inputs. The Tribunal also considered the decision in Vandana Global Ltd. case, which held that iron and articles used as supporting structures were not eligible for credit. However, the Tribunal found that the amendment made on 7-7-2009 regarding the definition of input was not clarificatory and should be applied prospectively.

The Tribunal further referenced the decision of the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd., where it was observed that the amendment made on 7-7-2009 was not clarificatory. The Tribunal also cited the Supreme Court's decision in CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., where the user test was applied to determine whether certain goods could be considered capital goods. Applying the user test, the Tribunal found that the structural items used in the fabrication of support structures for capital goods fell within the ambit of Capital Goods as defined under Rule 2(a) of the Cenvat Credit Rules. The structural items were considered parts of the relevant machines, and therefore, entitled to cenvat credit.

Based on the Tribunal's analysis and following the precedent set by previous decisions, the impugned order denying cenvat credit was set aside, and the appeal filed by the appellant was allowed. The Tribunal's decision was dictated and pronounced in the Open Court.

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