Appellate Tribunal Upholds Denial of Modvat Credit on Structural Steel Items

The Appellate Tribunal CEGAT, New Delhi, upheld the denial of Modvat credit on structural steel items for machinery erection, amounting to Rs. 4,24,601/-. The tribunal considered the items as akin to building materials, not eligible for Modvat credit as capital goods, despite the appellants' argument that they were essential for machinery installation. The appeal against the Commissioner (Appeals) decision was dismissed based on the consistent view that such structural materials are ineligible for Modvat credit, emphasizing the importance of decisions from Double Member Benches in determining the nature of materials for machinery mounting and installation.

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Issues: Denial of Modvat credit on structural steel items as capital goods under Rule 57Q of Central Excise Rules, 1944.

In this judgment by the Appellate Tribunal CEGAT, New Delhi, the issue revolved around the denial of Modvat credit amounting to Rs. 4,24,601/- availed by the appellants on structural steel items like CHN Channels, FLTS Plain Plates, Chequerred Plates, JSTI Joists, and Angles, used in the manufacturing of Bulk Drugs/Drug Intermediates falling under Chapter 29. The appellants argued that these items are essential for mounting and installing machinery, forming the basic installation for machinery, distinct from steel items used in building construction. However, the Asstt. Commissioner of Central Excise denied the Modvat credit, stating that structural steel for erecting machinery is not component parts of machines but part of civil work for machinery erection, hence not eligible for Modvat credit as capital goods.

The party filed an appeal against the Commissioner (Appeals) decision, which was the subject of this appeal. The appellants' counsel relied on various decisions to support their contention, emphasizing the distinction between structural materials used for machinery installation and building materials. On the other hand, the JDR for the respondents cited Tribunal decisions holding that structural materials used for fabrication of machinery are akin to building materials and not eligible for Modvat credit as capital goods.

The Tribunal noted a consistent view on the nature of structural materials used for machinery erection, considering them as building materials ineligible for Modvat credit as capital goods. Despite some conflicting decisions by Single Members, the Tribunal found no merit in the appeal based on the cited decisions and dismissed the appeal accordingly. The judgment highlighted the importance of considering decisions from Double Member Benches in such cases, emphasizing the nature of the materials and their use in machinery mounting and installation.

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