Cenvat credit on M.S. Plate as Input

[vk pathak]

Ours is a Sugar Unit We have availed cenvat credit on M.S.Plate used in Maintenence and fabrication of vessels pipe as Input. Department issued SCN for demand with interest and penality. Please submit your advice in the matter

[Snehal Kulkarni]

 

 

Please refer the Rule 2(a) & (k) for defination of Cenvat Credit Rules 2004 ( also refer to the NTF. NO. 16/2009-CE. (N.T.), DT. 07/07/2009 & Notification No 3/2011-CE.NT dated 01.03.2011)

The Credit of duty on MS Angle Plates Coils is not admissible after 01.03.2011.

But you can defend the case prior to 01.03.2011 on merit.

Thanks

[Radha Arun]

As I understand it, you have used MS plate in maintenance by fabrication of vessel pipe. "Pipe" is defined as capital goods in the Cenvat Credit Rules 2004: please see Rule 2(a), part A, clause (vi). Further, in terms of Rule 2(k)(Explanation 2) as it stood upto 31.3.2011, "input" included goods used in the factory to fabricate capital goods.

There is an exclusion in the 'Explanation'. In terms of this exclusion, "input" will not cover CTD, TMT, angles, channels, cement and other items used for the following: construction of factory shed / building, laying of foundation, or making structures for support of capital goods.

It seems to me that the MS plates were used by you for permitted purpose and not in connection with construction or as supporting structures. The notice can be contested along these lines.

[YAGAY and SUN]

MS/SS plates ysed in workshop for repoar and amintenance of machinery are capital goods and eligible for CENVAT credit - UOI v Hindustan Zinc Ltd 2007 214 ELT 510 (Raj HC DB) - followed in Dhampur Sugar Mills v CCE 2008 226 ELT 742 (CESTAT SMB)

[Radha Arun]

The case law cited by Mr Pradeep Khatri is prior to 2009. In July 2009 the Explanation 2 to Rule 2(k) definition of inputs was amended. By this amendment  angles, channels, etc used for construction / foundation / supporting structures were excluded from "inputs". In a Tribunal Larger Bench ruling in the case of Vandana Global Ltd, this amendment was held to be applicable retrospectively, to the earlier period also. So, the position is that these items,used for these purposes, are not eligible for credit.

Therefore, your case must be argued on the basis of the purpose for which the MS plates were used.

[Shrikant Gaonker]

I too agree with Mr Manguesh Lokre.

[BHARAT PUROHIT]

IT IS IMPORTANT TO KNOW THE GROUNDS ON WHICH SCN IS ISSUED.

  CENVAT CREDIT ON RAW MATERIAL USED FOR MAKING CAPITAL GOODS WITHIN THE FARCTORY IS ALLOWED.

 

 NEED TO KNOW THE CONTENTS OF SCN. CAN FURTHER COMMENT IF SCN IS  SCANNED & RECD.

 THNX/ B.B.PUROHIT

AI Summary

Cenvat credit on MS plate: allowed if used to fabricate capital goods, disallowed when used for construction or support.
Cenvat credit on MS plate depends on whether the plates were used as inputs to fabricate capital goods within the factory (qualifying for credit) or were employed for construction, foundation or supporting structures (excluded from input). Amendments to the Explanation to the input definition and later notifications reduced admissibility for items like plates and angles; some rulings applied those amendments retrospectively. Challenges to show eligibility should focus on the actual purpose of use during the relevant period.