2018 (7) TMI 253 - AT - Central Excise

Tribunal Upholds Commissioner's Decision on Cenvat Credit Eligibility

The Tribunal upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeal regarding irregular Cenvat credit availed by the assessee. The ... CENVAT Credit - structural items such as platforms, structures for capital goods and material handling system - denial of credit on the ground that the chain of structural system so erected is permanent in nature and is completely embedded to earth, and is therefore, an immovable property - CBEC Circular No. 441/7/99-CX dated 23.02.1999 - Held that:- The usage of various iron and steels items is to be analysed in light of the decision of the Hon’ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA], where it was held that Applying the 'user test' on the facts in hand, we have no hesitation in holding that the steel plates and M.S. Channels, used in the fabrication of chimney would fall within the ambit of 'capital goods' as contemplated in Rule 57Q. The observation of the Tribunal in the case of Dhampur Sugar Mills Ltd. Vs. Commissioner of Central Excise, Meerut [2013 (5) TMI 137 - CESTAT NEW DELHI] is applicable to the instant case, where it was held that The structural part to be used as support for Boiler had been fabricated in some other factory and had been brought to this factory where the same has been erected. Since in the facts of this case, the structural part, though supporting structure, is more like a component of the boiler, the denial of cenvat credit in respect of the same would not be correct. Credit allowed - appeal dismissed - decided against Revenue. Issues:- Irregular Cenvat credit availed by the assessee.- Classification of impugned goods as input under Rule 2(k) of the Cenvat Credit Rules, 2004.- Usage of various iron and steel items in manufacturing processes.- Applicability of user test in determining categorization of goods as capital goods.Analysis:Issue 1: Irregular Cenvat credit availed by the assesseeThe appeal was filed against the Order-in-Appeal dated 22.09.2017, where the department alleged that the assessee had utilized irregular Cenvat credit amounting to Rs. 10,03,389. The department observed that the credit was availed on structural items like platforms and structures for capital goods, which were not used in the manufacture of final products. A show cause notice was issued for recovery of the credit along with interest and penalty. The adjudicating authority confirmed the demand and imposed a penalty equal to the duty amount. However, the Commissioner (Appeals) set aside the adjudication order, leading to the Revenue's appeal before the Tribunal.Issue 2: Classification of impugned goods as input under Rule 2(k)The Revenue argued that the structural system erected by the assessee was permanent and immovable, not falling under the definition of input under Rule 2(k) of the Cenvat Credit Rules, 2004. It was contended that the impugned goods were not used in the manufacturing process of final products. In contrast, the assessee claimed that parts of the boiler purchased in CKD condition were components of capital goods, citing CBEC Circular No. 441/7/99-CX dated 23.02.1999 to support their case.Issue 3: Usage of various iron and steel itemsThe Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. and the 'user test' outlined in the case of CCE, Coimbatore v. Jawahar Mills to analyze the usage of iron and steel items. The Tribunal found the observation in the case of Dhampur Sugar Mills Ltd. relevant, emphasizing that components and accessories of capital goods can be of any heading, not necessarily those specified in the definition of capital goods.Issue 4: Applicability of user testThe Tribunal rejected the Revenue's appeal based on the discussion and precedents cited, including the judgment in the case of Dhampur Sugar Mills Ltd. Vs. Commissioner of Central Excise, Meerut. The Tribunal concluded that the denial of Cenvat credit for items used as part of machinery covered by the definition of capital goods was incorrect, thereby upholding the decision of the Commissioner (Appeals) and disposing of the cross objection.In conclusion, the Tribunal's judgment upheld the Commissioner (Appeals) decision, emphasizing the application of legal principles and precedents in determining the eligibility of Cenvat credit and classification of goods in the context of central excise laws.