CESTAT allows CENVAT Credit for inputs used in capital goods manufacturing including channels, angles, plates

The CESTAT Kolkata ruled in favor of the appellant regarding CENVAT Credit eligibility for inputs including channels, angles, joists, plates, coils, and welding electrodes. The appellant used these materials in conveyor systems, iron ore silos, furnace gratings, and other essential capital goods for manufacturing. A Chartered Engineer's certificate confirmed proper utilization. The tribunal noted that similar demands based on the Vandana Global decision were consistently set aside by tribunals and HCs across India. The CESTAT concluded that inputs supporting plant and machinery constitute integral parts of capital goods, making the appellant eligible for CENVAT Credit. Appeal allowed.

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The Appellate Tribunal considered the issue of eligibility for CENVAT Credit on various inputs used in the fabrication and commissioning of capital goods by the appellant, who is engaged in the manufacture of Sponge Iron. The core legal question was whether the inputs procured by the appellant, such as channels, angles, joists, plates, coils, and welding electrodes, qualified for CENVAT Credit under the Cenvat Credit Rules, 2004.The Tribunal analyzed the appellant's claim for CENVAT Credit in light of the decision of the Larger Bench in Vandana Global Limited, which held that certain items used for construction purposes may not qualify as inputs under Rule 2(k) of the Cenvat Credit Rules. The Adjudicating Authority initially denied the CENVAT Credit based on this interpretation, stating that many of the items were used for fabrication of supporting structures. The Commissioner (Appeals) partially allowed the credit on welding electrodes but confirmed the denial of credit on other inputs.The appellant argued that the inputs were either directly used in the manufacture of capital goods or in making supporting structures for the capital goods. They relied on the case law of Thiru Aroran Sugars and Mundra Ports and Special Economic Zone Ltd. to support their claim that inputs used in supporting structures for plant and machinery are eligible for CENVAT Credit.After considering the submissions and evidence presented by both parties, the Tribunal found that the appellant had provided detailed certificates from a Chartered Engineer demonstrating the utilization of the inputs in the fabrication of capital goods or supporting structures. The Tribunal noted that similar demands based on the Vandana Global decision had been set aside in other proceedings across India.The Tribunal examined a table provided by the Adjudicating Authority, showing the usage of the inputs in various capital goods such as conveyor systems, furnace gratings, and product storage hoppers. They concluded that the inputs were essential for the manufacturing process and fell within the scope of Rule 2(a)(A) and 2(k) of the 2004 Rules.Referring to the decisions of Thiru Arooran Sugars and Mundra Ports, the Tribunal held that the inputs used for supporting plant and machinery should be considered integral parts of the capital goods, making the appellant eligible for CENVAT Credit. They set aside the impugned order and allowed the appeal on merits, granting the appellant consequential relief as per the law.In conclusion, the Tribunal ruled in favor of the appellant, recognizing the eligibility of the inputs for CENVAT Credit based on their use in the fabrication of capital goods and supporting structures. The decision was pronounced on 11th February 2025.

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