2024 (1) TMI 135 - AT - Central Excise

MS angles, channels, beams for capital goods manufacturing qualify for CENVAT credit before Rule 2(k) amendment

CESTAT Chennai partially allowed appellant's appeal regarding CENVAT credit denial on MS angles, channels, and beams used in manufacturing supporting ... CENVAT Credit - MS angles, channels, beams etc. - denial of part credit for the reason that the these goods are used in the manufacture of supporting structures of capital goods, and that as per Explanation to Rule 2(k) is ineligible. HELD THAT:- The said Explanation was introduced by Notification No.16/2009-CE (NT) dated 07.07.2009 only. The decision rendered by the Larger Bench of the Tribunal in Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] has been set aside by the Hon’ble High Court of Chhattisgarh as reported in [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT]. Further, the Hon’ble Jurisdictional High Court in the case of Thiru Arooran Sugars [2017 (7) TMI 524 - MADRAS HIGH COURT] has held that the Explanation does not have a retrospective application and also that user test has to be applied. As per the Annexure to the show cause notice, three invoices No.274/17.09.2009, 3009/02.02.2010 and 3100/02.02.2010, fall beyond the period of 07.07.2009 - the credit on these invoices are disallowed - Appellant is eligible for the credit in respect of all invoices which are issued prior to 07.07.2009. Appeal allowed in part. Issues involved: The issue involves the eligibility of Cenvat credit on MS angles, channels, and beams used for supporting structures of capital goods, specifically pertaining to the retrospective application of the Explanation introduced in Rule 2(k) of the Cenvat Credit Rules, 2004.Summary:1. The appellant, engaged in the manufacture of sugar and molasses, availed Cenvat credit on MS angles, channels, and beams used for supporting structures of capital goods. The department sought to deny this credit for the period September 2008 to February 2010, leading to a show cause notice and subsequent appeal to the Tribunal. 2. The appellant's counsel argued that the denial of credit based on the retrospective application of the Explanation in Rule 2(k) of the CCR 2004 was incorrect. Citing relevant judgments, it was contended that the credit availed on these items should be allowed as they are integral to the manufacturing process and satisfy the user test, especially for invoices issued before 07.07.2009. 3. The adjudicating authority had denied a portion of the credit based on the retrospective application of the Explanation, leading to a penalty under Section 11AC of the Central Excise Act, 1944. However, after considering the arguments and precedents, the Tribunal found that the appellant was eligible for credit on all invoices except those dated after 07.07.2009. 4. The Tribunal, after analyzing the facts and legal principles, modified the impugned order to allow credit on invoices issued before 07.07.2009, except for three invoices falling beyond that date. The appeal was partly allowed with consequential reliefs granted accordingly.