2016 (1) TMI 1142 - AT - Central Excise

Denial of CENVAT credit - MS Round, MS Pipe/Plate/Beam/Channel falling under Chapter 72/73 - SSI exemption availed - whether denial of CENVAT credit justified on the ground that these are not capital goods and credit as inputs for them is not available as the appellants are availing SSI exemption? - Held that - The admitted facts of the case are that the MS Rounds and other MS products on which credit was availed by the appellant were used in the manufacture/fabrication of moulds by/on behalf of the appellant. The said moulds are admittedly used by the appellant in their manufacturing process. Given this factual position and applying the user test in terms of Hon ble Supreme Court s decision in CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA , the appellants are eligible for Cenvat credit on these items - denial of credit not justified - appeal allowed - decided in favor of appellant.

Summary

Issues: Eligibility of Cenvat credit on MS products as capital goods under Notification No. 8/2003-C.E.

Analysis:
1. The appeal challenged the order disallowing Cenvat credit on MS Round, MS Pipe/Plate/Beam/Channel under Chapter 72/73, while the appellant was availing SSI exemption and exemption under Notification No. 8/2003-C.E., dated 1-3-2003. The Original Authority disallowed the credit on steel items but allowed credit on moulds as capital goods, imposing a penalty. The Commissioner (Appeals) upheld the original order except for the penalty.

2. The appellant contended that moulds are essential capital goods in their manufacturing process, and the disputed MS products were used for fabrication and manufacture of moulds by job workers. Citing the Supreme Court's decision in CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., the appellant argued that the MS products should be considered as parts and components of moulds, making them eligible for credit.

3. The Authorized Representative (DR) reiterated that MS Angles and other products falling under Chapter 72 cannot be considered capital goods, aligning with the findings of the lower authorities.

4. After examining the records and arguments, the Tribunal focused on the factual position that the MS products were used in manufacturing/fabrication of moulds, which were further used in the manufacturing process. Applying the "user test" from the Supreme Court's decision, the Tribunal concluded that the appellants were eligible for Cenvat credit on these items. Consequently, the impugned order disallowing the credit was set aside, and the appeal was allowed.