2024 (8) TMI 313 - AT - Central Excise

Storage bunkers and pollution control support structures qualify for CENVAT credit under capital goods test

M/s. Steel Authority of India Ltd. Versus Commissioner of GST and Central Excise, Salem Commissionerate

CESTAT Chennai partially allowed the appeal regarding CENVAT credit eligibility on various items. The tribunal held that credit was eligible for storage ... CENVAT Credit - capital goods or not - MS Sheets, Plates, Angles, Technological Structures, foundation bolts and nuts and railway sleepers falling under Chapter 72, 73 & 68 - period May 2008 to January 2013 - time limitation. CENVAT credit on storage bunker - HELD THAT:- The definition of capital goods includes storage tank. Merely because, the bunker is used for temporarily holding the raw materials, it cannot be said that it does not serve the purpose of storage - the credit in regard to storage bunker is eligible. CENVAT Credit on certain items used in the nature of support structure for Bag Filters, Hoppers for Spark Arrestor and structure for dust silos - HELD THAT:- It can be seen that pollution control equipment falls within the definition of capital goods. The said equipment cannot be put into effective use without being embedded to earth. There are various parts which have to be assembled and connected at site using steel structures. The items which are used for holding and connecting the various parts of the pollution control equipment and other machines which is eligible for credit. CENVAT Credit on Cable tray - HELD THAT:- The cable trays are used for holding electrical cables of the machines and are accessories of capital goods. The credit is eligible. CENVAT Credit on sub-station electrical equipment - HELD THAT:- Certain items have been used for sub-station electrical equipment which is not eligible for credit. CENVAT Credit on Earthing Material - HELD THAT:- This is also used for electrical protecting wiring and therefore not eligible for credit. CENVAT Credit on Galvanised Structure - HELD THAT:- The end use of this item is for electrical equipment in main receiving sub-station. The said invoice is not eligible for credit. CENVAT Credit on electrical power and main receiving sub-stations - HELD THAT:- These items are not eligible for credit. CENVAT Credit on GI earthing wire - HELD THAT:- The items in the nature of GI earthing wire used for electrical protective earthing which is not eligible for credit. CENVAT Credit on DCS System Spares - HELD THAT:- The description of item is ‘DCS System Spares’ which is used for electrical equipment in main receiving sub-station is not eligible for credit. Duplication of invoice - HELD THAT:- It is noted that it is a duplication of Sl.No. 289 and for this reason, this invoice dated 03.04.2010 is not eligible for credit. CENVAT Credit on GI Earthing Strip - HELD THAT:- The items described are ‘GI Earthing Strip’ which is used for protective wiring and electric equipment which is not eligible for credit. CENVAT Credit on items used are for electrical installation and protective wiring, etc. - HELD THAT:- The items used are for electrical installation and protective wiring, etc., is not eligible for credit. CENVAT Credit on on railway sleepers - HELD THAT:- In the present case, the appellant has availed credit on railway tracks as well as concrete sleepers. The credit availed on concrete sleepers would not be admissible. In Annexure 1 of the Chartered Engineer Certificate, the details of the credit availed in respect of railway sleeper and concrete sleeper has been given. On perusal, the concrete sleeper in this Annexure is not eligible for credit. On merits, the issue of eligibility of credit on concrete sleepers is held in favour of revenue and against the assessee. The Tribunal in the case of Singhal Enterprises Private Limited [2016 (9) TMI 682 - CESTAT NEW DELHI] had occasion to consider the issue of eligibility of credit wherein the user test was put into application to allow the credit. The Tribunal relied upon the decision in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT] and held that when steel plates, MS Channels, Sheets are used for fabrication of capital goods or for putting the capital goods into effective use, the credit is eligible. Time Limitation - HELD THAT:- On perusal of the Show Cause Notice, apart from a vague allegation that appellant has suppressed facts with intention to evade duty, there is no positive act of suppression established against the appellant. The appellant has filed periodical returns disclosing the credit availed. Several audits were conducted. The appellant being a Public Sector Undertaking there cannot be any wilful intention to evade payment of duty as decided in the case of CISF Unit [2019 (2) TMI 1175 - CESTAT NEW DELHI] - The decision in the case of Uniworth Textiles Ltd. [2013 (1) TMI 616 - SUPREME COURT] has held that there has to be wilful suppression with intent to evade payment of duty. On the totality of facts, and following the decision, the demand raised invoking the extended period cannot sustain. Appeal allowed in part. Issues Involved:1. Eligibility of CENVAT Credit on structural items.2. Denial of credit on storage bunker.3. Denial of credit on support structures for pollution control equipment.4. Denial of credit on cable trays.5. Denial of credit on items used for sub-station electrical equipment.6. Denial of credit on railway sleepers.7. Limitation period for issuing the Show Cause Notice.Detailed Analysis:1. Eligibility of CENVAT Credit on Structural Items:The appellants claimed CENVAT Credit on items like MS Sheets, Plates, Angles, Technological Structures, foundation bolts and nuts, and railway sleepers under the category of capital goods. The Department argued that these items do not fall under the prescribed chapters (82, 84, 85, 90, 6804, or 6805) as per Rule 2(a) of the CENVAT Credit Rules, 2004, and thus are ineligible for credit. The Tribunal noted that the appellant provided a Chartered Engineer's Certificate verifying the end use of these items, which the Department did not discredit. The Tribunal referenced the Larger Bench decision in Commissioner of Central Excise Vs. Modi Rubber Ltd., allowing credit under the category of inputs if the items fit the definition.2. Denial of Credit on Storage Bunker:The Adjudicating Authority denied credit on the storage bunker, stating it only temporarily holds raw materials and cannot be considered a storage tank. The Tribunal held that the definition of capital goods includes storage tanks and that temporary holding does not negate its purpose as a storage unit, thus allowing the credit.3. Denial of Credit on Support Structures for Pollution Control Equipment:The Original Authority denied credit on items used as support structures for pollution control equipment, arguing they are permanently embedded and cannot be considered parts, components, or accessories. The Tribunal disagreed, stating that pollution control equipment falls within the definition of capital goods and cannot function effectively without these support structures. Therefore, the credit was deemed eligible.4. Denial of Credit on Cable Trays:Credit was denied on cable trays used for holding electrical cables. The Tribunal held that cable trays are accessories of capital goods and are necessary for their effective use, thus allowing the credit.5. Denial of Credit on Items Used for Sub-Station Electrical Equipment:The Tribunal found that items used for sub-station electrical equipment do not qualify as capital goods. Specific items listed in the Chartered Engineer's Certificate, such as 'Earthing Material,' 'Galvanised Structure,' and 'GI Earthing Strip,' were deemed ineligible for credit as they are used for electrical installations and protective wiring.6. Denial of Credit on Railway Sleepers:The Tribunal referenced the decision in JSW Steel Ltd. and Jayaswal NECO Ltd., which allowed credit on railway tracks used for transporting materials within the factory. However, credit on concrete sleepers was denied as they do not qualify under the definition of capital goods.7. Limitation Period for Issuing the Show Cause Notice:The Show Cause Notice was issued for the period May 2008 to January 2013, alleging suppression of facts. The Tribunal found no positive act of suppression by the appellant, a public sector undertaking. The appellant had filed periodical returns and was subjected to regular audits. Following the decision in Uniworth Textiles Ltd., the Tribunal held that there was no wilful suppression with intent to evade duty, thus the extended period for demand was not applicable.Conclusion:The Tribunal modified the impugned order, allowing credit on most items except those specifically mentioned as ineligible in the analysis. The demand for duty was set aside for the extended period, and the appellant was liable to pay duty on ineligible items within the normal period. The appeal was partly allowed with consequential reliefs.