2019 (3) TMI 763 - AT - Central Excise

Tribunal grants appeal on capital goods eligibility under Cenvat Credit Rules

The Tribunal allowed both appeals, determining that the items in question qualified as capital goods based on judicial precedents and the interpretation ... CENVAT Credit - capital goods - Joists, MS plates, MS angles, Channels, Beams, HR coils, HR plates, HR sheets, Chequered plates etc., used as structurals in construction of plant - Held that:- It has been held in a slew of judgments by various High Courts, that MS structural that support plant and machinery or which went in erecting foundations to hold plant and machinery were integral part of capital goods - In Thiru Arooran Sugars [2017 (7) TMI 524 - MADRAS HIGH COURT], the Hon’ble High Court has held that whether user test is applied or the test that they are integral part of capital goods is applied, such items are eligible to get Cenvat benefit as they fall within the scope and ambit of Rule 2 (a) (A) as well as 2 (k) of CCR, 2004. Credit allowed - appeal allowed - decided in favor of appellant. Issues:1. Availment of Cenvat credit on certain goods as capital goods.2. Disallowance of credit and imposition of penalties under Central Excise Rules.3. Interpretation of definition of capital goods under Cenvat Credit Rules.Analysis:1. Issue 1 - Availment of Cenvat credit as capital goods:The appeals involved the irregular availment of Cenvat credit on various items like MS Channels, Angles, Plates, Bars, HR Coils, Joists, Beams, HR plates, HR sheets, Chequered plates, etc., for use as structurals in construction of plants. The Department contended that these items did not qualify as capital goods under the Central Excise Tariff Act. The original authority confirmed the demand for irregularly availed credit and imposed penalties. The Commissioner (Appeals) upheld these orders. The appellants argued that these items should be considered capital goods based on certain judicial precedents.2. Issue 2 - Disallowance of credit and imposition of penalties:The Department initiated proceedings for recovery of irregularly availed credit with interest and imposed penalties under the Central Excise Rules. The original authority and the Commissioner (Appeals) upheld these decisions. The appellants challenged these orders, citing judicial precedents that supported their claim that the items in question qualified as capital goods. The Tribunal noted conflicting decisions by various High Courts and the Supreme Court regarding the classification of such items as capital goods.3. Issue 3 - Interpretation of definition of capital goods:The Tribunal analyzed the definition of capital goods under the Cenvat Credit Rules, 2004, and referred to judgments by different High Courts and the Supreme Court. It was observed that items like MS structural components supporting plant and machinery or used in erecting foundations were considered integral parts of capital goods by several courts. The Tribunal referred to specific cases where High Courts had allowed Cenvat benefit for such items, overturning earlier decisions. The Tribunal concluded that the items in question qualified as capital goods as per the relevant rules and judicial interpretations, thereby allowing the appeals and setting aside the impugned orders.In conclusion, the Tribunal allowed both appeals, emphasizing that the items in question were integral parts of capital goods based on various judicial precedents and the interpretation of the Cenvat Credit Rules. The Tribunal's decision was supported by the judgments of different High Courts and previous Tribunal decisions, providing clarity on the eligibility of certain items for Cenvat credit as capital goods.