2020 (2) TMI 1251 - AT - Central Excise

Repair materials qualify as 'Capital Goods' for Cenvat Credit

M/s Bhaurao Chavan SSK Ltd. Versus C.C.E. & S.T., Aurangabad

The Tribunal allowed the appeal, holding that steel items used for repairing the foundation frame of the Return Bagasse Carrier qualified as 'Capital ... CENVAT Credit - input/capital goods - M.S. Angles, M.S. Beams, M.S. Plate, M.S. Round Bar, H.R. Sheet, S.S. Plate (Cut Plate), Forged Sheet Bar, M.S. Channels used for repair/maintenance of foundation frame of Return Bagasse Carrier (RBC) - HELD THAT:- It is clear from the case records that the steel items in dispute were consumed by the appellants only for repair/maintenance of foundation frame i.e. the component of the RBC and not for laying down the foundation for RBC. They were used only for the repairing of the frame of RBC. The frame is essential part of the machine and no machinery can be installed without its frame. They can also be said to be essential accessory in a plant/factory. The repair of the said frame is also equally important alongwith the machine. In COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS M/S JINDAL STEELS AND POWER LTD. [2016 (1) TMI 59 - CESTAT NEW DELHI] it has been held that the definition of ‘Capital Goods’ includes components, spares and accessories of such capital goods and applying the ‘User Test’, the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) hence will be entitled to the Cenvat Credit. The eligibility of various iron and steel items for Cenvat credit, when used in the fabrication of capital goods, technological structures associated with capital goods, have been subject matter of various decisions by the Tribunal. “User Test” is found to be the appropriate test to see whether the items used in the repair/fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) ibid. The steel material in question is not used for laying down the foundation of RBC but is used for the repair of its foundation frame, which by any stretch of imagination cannot be said to be part of that foundation which has been excluded from the purview of the definition of input in Rule 2(k). The appellants are therefore eligible for Cenvat Credits on those items which were rejected by the learned Commissioner. Appeal allowed - decided in favor of appellant. Issues Involved:Denial of Cenvat Credit on specific steel items used for repair/maintenance of foundation frame of Return Bagasse Carrier (RBC).Analysis:The appeal challenges the order denying Cenvat Credit on various steel items used for repair/maintenance of the foundation frame of RBC. The department argued that these items did not qualify as capital goods or inputs under the Cenvat Credit Rules, leading to a demand notice. The Order-in-Original confirmed the demand, but on appeal, the Commissioner partially allowed it, upholding the demand only for a specific amount. The appellant contended that the steel items were used for repair/maintenance of the foundation frame, making them eligible as capital goods. Citing relevant case law, the appellant argued that the steel items fell within the definition of 'Capital Goods' under Rule 2(a) and were eligible for Cenvat Credit. The issue of extended limitation period was also raised by the appellant. The Authorized Representative maintained that the items did not meet the criteria for inputs or capital goods and that the appellant failed to provide necessary documentation to support their claim.The Tribunal examined the case records, finding that the steel items were solely used for repairing the foundation frame of RBC, an essential component of the machine. Referring to precedent, the Tribunal applied the 'User Test' to determine that the steel items used in repair/fabrication of support structures qualified as 'Capital Goods' under Rule 2(a) and were entitled to Cenvat Credit. The Tribunal emphasized the importance of proper installation for machinery functionality and noted that the steel in question was not used for laying down the foundation but for repairing the foundation frame. Consequently, the appellants were deemed eligible for Cenvat Credits on the disputed items. Given the decision in favor of the appellants on merit, the Tribunal did not address the issue of the extended limitation period raised by the appellants.In conclusion, the Tribunal allowed the appeal filed by the Appellant, providing consequential relief as necessary. The order was pronounced in open court on 27.02.2020.