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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether Cenvat credit on steel items used in fabrication of precast shapes and related finished goods was admissible as inputs and not disallowable as capital goods or structural supports.
Analysis: The factual verification report showed that the steel items were used in the manufacture of precast shapes, central blocks and end blocks with metal frames, and that the items were consumed in the process and formed part of the finished goods supplied to the customer. On those facts, the dispute was not about use of steel items for construction of factory shed, building, foundation, or supporting structures. The denial of credit proceeded on the assumption that the items were used as capital goods or structural support, but the verified documents established their use as inputs in manufacture. In such a situation, the credit claim had to be tested on the actual use of the goods in manufacture under Rule 2(k) of the Cenvat Credit Rules, 2004, and the earlier adverse findings could not be sustained.
Conclusion: The Cenvat credit on the disputed steel items was admissible and the disallowance, demand, interest and penalty could not be sustained. The appeal was allowed in favour of the assessee.
Ratio Decidendi: Steel items used as consumable inputs in the manufacture of finished goods, and not for construction or structural support, cannot be denied Cenvat credit merely by characterising them as capital goods.
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