2022 (11) TMI 1143 - AT - Central Excise

Appeal successful: steel items for structural support deemed 'capital goods' for CENVAT Credit.

M/s. Kalimata Vyapaar Private Limited Versus Commissioner of CGST & CX, Bolpur Commissionerate

The Appeal was allowed, and the impugned orders were set aside. The Tribunal held that steel items used for fabricating structural support qualify as ... Irregular utilization of CENVAT Credit - inputs used in manufacture of capital goods - Joist - MS Channel - MS Joist - TMT Bars - Plate - RS Joist - MS Angles - nexus/pertinence in or in relation to manufacture of the excisable goods - applicability of N/N. 61/2009-CE (NT) dated 07.07.2009 - period March 2008, July 2008 and January 2009 - HELD THAT:- Clause (i) of Rule 2(a)(A) is parimateria with clause (3) of the table annexed to Rule 57Q. Similarly, clause (iii) of Rule 2(a)(A) is parimateria with clause (5) of the table annexed to Rule 57Q. In the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT], the Hon’ble Supreme Court considered the question whether the steel plates and channels used in the fabrication of chimney for DG set would fall within the purview of Sl. No. 5 of the table annexed to Rule 57Q. The Hon’ble Supreme Court observed that the DG set fell under Heading No. 85.02, Chapter 85, of First Schedule to the Central Excise Tariff Act and ipso facto got covered under Sl. No. 3 of the table ibid. The Hon’ble Supreme Court further noted that the chimney attached to the DG set was undisputedly covered by Sl. No. 5 of the table ibid. On this basis, it was held that the chimney was an integral part of the DG set and, therefore, MS channels, plates, etc., used in its fabrication were to be treated as accessories in terms of Sl. No. 5 of the table ibid. This judgement was rendered by applying the “user test”. The facts of the present case are perfectly analogous to those of Rajasthan Spinning & Weaving Mills Ltd. It is not in dispute that MS angles, plates, etc., were used to fabricate structural support for machinery which was used for manufacturing excisable goods. It is, again, not in dispute that the machinery is squarely covered by clause (i) of Rule 2(a)(A) of the CENVAT Credit Rules, 2004. The immediate question is whether the structural support for the machinery could be treated as ‘capital goods’. Indeed, it should be construed to be an integral part of the machinery and hence to be covered by clause (i) ibid. If that be so, as held by the Hon’ble Supreme Court in the aforesaid case, the plates, angles, etc., used for fabricating structural support will fall within the purview of clause (iii) of Rule 2(a)(A). Therefore, it has to be held that the MS angles, plates and rounds used by the Respondent for fabricating structural support for machinery would qualify to be ‘capital goods’ for the purpose of availing CENVAT credit. The view of the Tribunal’s Larger Bench in the case of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], taken much before the Hon’ble Supreme Court rendered the judgement in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT], was to the effect that the supporting structure for a machinery could not be considered to be part or accessories of the machinery and, therefore, the steel items used for constructing such supporting structure would not be ‘capital goods’ for the purpose of CENVAT credit. This view of the Larger Bench is no longer valid as it runs contrary to the subsequent ruling of the Apex Court. The Appeal filed by the Appellant is allowed. Issues:1. Irregular utilization of CENVAT Credit.2. Applicability of amending Notification No.61/2009-CE (NT).3. Whether steel items qualify as 'capital goods' for CENVAT Credit.4. Interpretation of Rule 2 of CENVAT Credit Rules, 2004.5. Effect of Tribunal's previous ruling on 'capital goods'.6. Comparison with Supreme Court judgment on similar issue.Analysis:1. The case involved an allegation of irregular utilization of CENVAT Credit amounting to Rs.1,61,856 in contravention of CENVAT Credit Rules, 2004. The dispute arose from the usage of steel items like Joist, MS Channel, TMT Bars, etc., in the manufacture of capital goods and structural accessories. The authorities confirmed the demand and imposed a penalty based on the decision in Vandana Global Ltd. case.2. The Appellant argued that the lower authorities wrongly relied on an amending Notification to deny credit for specific months, claiming the Notification was not retrospective. The Department's Authorized Representative supported the impugned orders.3. The main issue was whether the steel items qualified as 'capital goods' for availing CENVAT Credit. The Adjudicating authority's decision was based on the Vandana Global Ltd. case, which was challenged due to a subsequent judgment by the Chhattisgarh High Court. The High Court's decision clarified that structural supports for machinery could be considered 'capital goods'.4. The interpretation of Rule 2 of CENVAT Credit Rules, 2004 was crucial in determining the eligibility of steel items for CENVAT Credit. The Tribunal analyzed the applicability of different clauses and compared the case with a Supreme Court judgment on a similar issue regarding the fabrication of structural support for machinery.5. The Tribunal found that the previous ruling of the Tribunal's Larger Bench in Vandana Global Ltd. case, which denied the steel items as 'capital goods', was no longer valid post the Supreme Court's judgment. The Tribunal concluded that the steel items used for fabricating structural support qualified as 'capital goods' for availing CENVAT Credit.6. In light of the above analysis, the impugned orders were set aside, and the Appeal filed by the Appellant was allowed with consequential relief, aligning with the interpretation that structural supports for machinery could be treated as 'capital goods' for CENVAT Credit purposes.