2014 (4) TMI 141 - AT - Central Excise

Availment of CENVAT Credit - Held that - From the findings of the Assistant Commissioner, which have been upheld by the Commissioner (Appeals), it is clear that the steel items, in question, have been used for fabrication of various items of sugar mill machinery. There is also no dispute that sugar mill machinery is covered by Chapter 84 and hence its components would also be covered by the definition of capital goods, as given in Rule 2 (a) of Cenvat Credit Rules, 2004. It is not the finding of the Commissioner (Appeals) that each and every item of machinery had come into existence as fixed to the earth structure. From the description of various items of component and machinery, as given in the order, it is clear that these items has been fabricated and thereafter the same were installed. I, therefore, do not agree that the various items of the components of sugar mill machinery, fabricated by the appellant were fixed to the earth structures. Just because an item of machinery or its component after being fabricated has been installed in course of which it has become fixed to the earth, the Cenvat credit cannot be denied - Decided in favour of assessee.

Summary

Issues Involved:
Challenge to denial of Cenvat credit for steel items used in fabrication of sugar mill machinery.

Analysis:
The appellant, a manufacturer of sugar and molasses, availed Cenvat credit for steel items used in fabricating various components of sugar mill machinery. The department issued a show cause notice denying the credit, alleging the items were consumables for repair and maintenance, not eligible for credit. The Assistant Commissioner confirmed the demand, stating steel items were neither capital goods nor inputs. On appeal, the Commissioner (Appeals) upheld the decision, reducing the penalty. The appellant contended that the steel items were used in fabricating capital goods, citing relevant judgments. The Departmental Representative argued the items were used in fixed capital assessed to earth, justifying denial of credit.

The Assistant Commissioner's findings, upheld by the Commissioner (Appeals), acknowledged the steel items were used in fabricating sugar mill machinery components. As sugar mill machinery falls under Chapter 84, its components are considered capital goods under Cenvat Credit Rules. The judgment emphasized that items becoming fixed to earth after fabrication does not disqualify them from credit eligibility. Denying credit based on installation leading to fixation would render most machinery items ineligible for credit. Consequently, the judgment set aside the impugned order, allowing the appeal.

In conclusion, the judgment highlighted the importance of considering whether items qualify as capital goods under Cenvat Credit Rules, rather than focusing solely on their installation leading to fixation. The decision emphasized that fabrication of machinery components, even if later fixed to earth, does not automatically disqualify them from Cenvat credit eligibility. The judgment provided clarity on the interpretation of capital goods eligibility in the context of fabrication and installation processes, ensuring fair treatment for manufacturers availing Cenvat credit for machinery components.