2018 (7) TMI 1358 - AT - Central Excise

Tribunal grants Cenvat credit on iron and steel articles for manufacturing processes

The Tribunal allowed the appeal, setting aside the denial of Cenvat credit on various iron and steel articles used in manufacturing processes. Relying on ... CENVAT Credit - various articles of iron and steel namely MS Coils, MS Channels, GP Sheets, DHR Plates, etc. - case of appellant is that these items were used for the expansion of the plant for constructing the equipment and machinery for production of excisable goods. Held that:- Hon’ble Chhatisgarh High Court in the case of Commissioner of Customs, C.Ex & ST, Bilaspur v. Singhal Enterprises Pvt. Ltd. [2017 (7) TMI 1112 - CHHATTISGARH HIGH COURT] held that structural steel items used for fabrication of support structure for capital goods would be eligible for CENVAT credit - The Hon’ble Madras High Court in the case of Thiru Arooran Sugars Vs. CESTAT, Chennai [2017 (7) TMI 524 - MADRAS HIGH COURT] allowed the CENVAT credit on MS structures which support plant and machinery and cement and steel which were used in the erection of foundation that holds the plant machinery terming it as an essential element of the plant and machinery. It is noted that the Revenue had not disputed that these items have been used as components and accessories of the machinery which are used in the manufacturing of final product - there is no reason to deny the CENVAT credit on these items - appeal allowed - decided in favor of appellant. Issues Involved:1. Denial of Cenvat credit on various iron and steel articles.2. Classification of items as capital goods or immovable goods.3. Applicability of judicial precedents on eligibility for Cenvat credit.Issue-wise Detailed Analysis:1. Denial of Cenvat Credit on Various Iron and Steel Articles:The appellants, engaged in manufacturing sponge iron and M.S. Billet, were issued a show cause notice proposing denial of Cenvat credit on items like MS Coils, MS Channels, GP Sheets, and DHR Plates for the period from September 2008 to June 2009. The adjudicating authority disallowed the Cenvat credit amounting to Rs. 69,18,905/- along with interest and imposed a penalty of an equal amount.2. Classification of Items as Capital Goods or Immovable Goods:The appellants argued that these items were used for plant expansion, constructing equipment, and machinery for excisable goods production. The adjudicating authority observed that the appellants did not provide chapter headings or evidence to classify these items as components or accessories of capital goods, making them eligible for Cenvat credit. The Commissioner (A) denied the credit, stating these items were immovable goods and parts of the plant, not capital goods.3. Applicability of Judicial Precedents on Eligibility for Cenvat Credit:The appellant's counsel cited various judicial decisions supporting the eligibility of Cenvat credit on similar issues:- CCEx., Bilaspur Vs. Singhal Enterprises Pvt. Ltd.: Structural steel items used for fabricating support structures for capital goods are eligible for Cenvat credit.- Singhal Enterprises Pvt. Ltd. Vs. CCEx., Raipur: The Tribunal held that items like MS Angles, Sections, Channels, and TMT Bars used in fabricating support structures for capital goods are eligible for Cenvat credit.- M/s Lafarge India Pvt. Ltd. Vs. CCEx, Raipur: Allowed Cenvat credit on steel items used in fabricating capital goods and accessories within the manufacturing premises.- Thiru Arooran Sugars Vs. CESTAT (Mum.): Allowed Cenvat credit on MS structures supporting plant and machinery and cement and steel used in erecting foundations for plant machinery.The Tribunal referenced the Hon’ble Chhattisgarh High Court decision in Commissioner of Customs, C.Ex & ST, Bilaspur v. Singhal Enterprises Pvt. Ltd., which held that structural steel items used for fabricating support structures for capital goods are eligible for Cenvat credit, dismissing the Revenue’s appeal. The Tribunal also noted the Hon’ble Gujarat High Court decision in Mundra Ports & Special Economic Zone Ltd., which clarified that the amendment made on 7-7-2009 to Rule 2(a) defining 'Input' is not retrospective.The Tribunal applied the 'user test' from CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., determining that structural steel items used for fabricating support structures for capital goods qualify as capital goods under Rule 2(a) of the Cenvat Credit Rules. The Tribunal concluded that these items are integral parts of the machinery used in manufacturing the final product, thus eligible for Cenvat credit.Conclusion:After considering the facts, user test, and judicial precedents, the Tribunal found no reason to deny Cenvat credit on the items in question. The impugned order was set aside, and the appeal filed by the appellant was allowed. The operative part of the order was pronounced in court.