2015 (2) TMI 422 - AT - Central Excise

Denial of CENVAT Credit - items used as supporting structures for machinery - Held that - The MS angles, channels, plates, beams etc., falling under chapter 73 of the tariff are not covered by the definition of capital goods as given in Rule 2(a) of the Cenvat Credit Rules, 2004, and hence, the same would not be eligible for cenvat credit as capital goods. These, items would be eligible for Cenvat credit only as input, as the definition of input, as given in Rule 2(k) also covers the goods used for manufacture of capital goods which are used in the factory for production. However, the items which are used as foundation or supporting structures of the machinery are excluded from the definition of input. The Departments contention is that the entire disputed quantity of structural steel items has been used as foundation or as supporting structures of the machinery, while, the appellants contention, supported by the Chartered Engineers Certificate, is that the entire quantity of MS Angles, channels, beams, plates etc. has been used for fabrication of various items of capital goods and hence, would be eligible for Cenvat credit. However, on going through the chartered engineers certificate, we find out that it simply lists out the various items of plant and machinery which have been fabricated, but the drawings of the items fabricated and the quantity used is not indicated. There is merit in the appellants plea regarding limitation, as during the period of dispute, there were conflicting judgments of the Tribunal on the issue of admissibility of Cenvat credit of the iron & steel items used in fabrication of supporting structure or foundation of the machinery, till the issue was finally decided in favour of the Revenue by larger bench judgment of the Tribunal in the case of Vandana Global Ltd.(2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)) and, therefore, longer limitation period under proviso to section 11A cannot be applied. According to the appellant the Cenvat credit demand of only ₹ 28 Lakh would be within time, even if, the Departments allegation regarding the usage of the iron and steel items for foundation or supporting structure of the machinery is accepted in toto and the Cenvat credit in respect of the same is held as inadmissible. - Partial stay granted.

Summary

Issues:
1. Eligibility of Cenvat credit for structural steel items used in fabrication of machinery.
2. Application of limitation period for Cenvat credit demand.
3. Requirement of pre-deposit for hearing of appeal.

Eligibility of Cenvat Credit:
The case involved the eligibility of Cenvat credit for structural steel items used in the fabrication of machinery by the appellant, who are manufacturers of sponge iron. The Department contended that these items were used as supporting structures for machinery and hence not eligible for Cenvat credit. The Commissioner upheld this view despite the appellant producing a Chartered Engineers certificate certifying the use of iron and steel items in the fabrication of various machinery components. The Tribunal noted that the items used as foundation or supporting structures of machinery are excluded from the definition of input for Cenvat credit. The Chartered Engineers certificate provided by the appellant did not specify the quantity of steel used for different machinery parts. The Tribunal acknowledged the conflicting judgments on this issue until a larger bench decision clarified the matter. The Tribunal found merit in the appellant's argument regarding the limitation period for the demand of Cenvat credit.

Application of Limitation Period:
The Tribunal observed that conflicting judgments existed on the admissibility of Cenvat credit for iron and steel items used in supporting structures until a larger bench decision settled the matter. The appellant argued that the longer limitation period should not apply due to the uncertainty caused by the conflicting judgments. The Tribunal agreed with this view and held that the longer limitation period under the proviso to section 11A could not be applied in this case. The Tribunal calculated that only a portion of the Cenvat credit demand would fall within the time limit even if the Department's allegations regarding the usage of iron and steel items were accepted.

Requirement of Pre-Deposit:
After considering the submissions from both sides, the Tribunal directed the appellant to deposit a specific amount within a stipulated period. Upon depositing this amount, the requirement of pre-deposit for the balance of the Cenvat credit demand, interest, and penalty would be waived, and the recovery thereof stayed. The Tribunal disposed of the stay application based on this directive, emphasizing compliance within the given timeline.

This judgment analyzed the issues of eligibility of Cenvat credit for structural steel items, the application of the limitation period for the Cenvat credit demand, and the requirement of pre-deposit for the hearing of the appeal. The Tribunal considered the evidence presented, conflicting judgments, and relevant legal provisions to reach a decision that balanced the interests of both parties involved in the case.