2019 (5) TMI 867 - AT - Central Excise

Appeal granted: staging structures for sugar machinery deemed capital goods under Cenvat Credit Rules

M/s. Olam Agro India Private Limited Versus Commissioner of Customs, CGST & Central Excise, Indore (M.P.)

M/s. Olam Agro India Private Limited Versus Commissioner of Customs, CGST & Central Excise, Indore (M.P.) - TMI Issues:1. Availment of Cenvat Credit on staging structures under Chapter 73.2. Interpretation of definition of 'Capital Goods' under Cenvat Credit Rules.Issue 1: Availment of Cenvat Credit on staging structures under Chapter 73The appellants, engaged in manufacturing 'Cane Sugar and molasses,' availed Cenvat Credit on staging structures purchased from M/s. Uttam Industrial Engineering Ltd. The Department objected to this, stating that the goods fell under Chapter 73 and were not covered as capital goods or inputs for the appellant. A show cause notice was issued proposing recovery of the Cenvat Credit amount. The appeal against the confirmation of this proposal was dismissed by the Order-in-Appeal. The appellant argued that the structures were part of sugar machinery and thus were rightly availed Cenvat Credit. The Department cited a previous case where it was held that such structures do not qualify as capital goods. After hearing both parties, the Tribunal analyzed the technical specifications of the purchase order and the Chartered Engineers Certificate. It was concluded that the structures were essential components of the sugar machinery and fell within the definition of capital goods. The Tribunal referred to the 'user test' principle established by the Supreme Court, allowing the Cenvat Credit. The Tribunal also highlighted relevant Circulars supporting the appellant's case and set aside the order under challenge, allowing the appeal.Issue 2: Interpretation of definition of 'Capital Goods' under Cenvat Credit RulesThe Tribunal delved into the definitions of 'inputs' and 'capital goods' under the Cenvat Credit Rules. It noted that the term 'Capital Goods' includes various goods falling under specific chapters, components, spares, and accessories of such goods. The Tribunal emphasized the importance of the user test principle as established by the Supreme Court in determining whether certain goods can be classified as capital goods. Applying this principle to the case at hand, the Tribunal found that the structural items in question were integral to the functioning of the sugar mill machinery and thus qualified as capital goods. The Tribunal also referenced relevant Circulars that supported the appellant's argument and highlighted the significance of the Chartered Engineers Certificate in determining the applicability of the user test principle. Additionally, the Tribunal noted a decision by the High Court of Chhattisgarh overturning a previous decision cited by the Department. Considering all these factors, the Tribunal set aside the previous order and allowed the appeal.---