2017 (12) TMI 1590 - AT - Central Excise

CENVAT Credit - whether the items M.S. Bar, TMT Bar, Channels, H.R. Coil and Angles, Cement etc. used by the appellant for the manufacture of the plant and machinery in their factory would be eligible for the Cenvat Credit? Held that - It is not disputed that the items were used in the manufacture of capital goods - the appellant furnished the documents to substantiate the use of these items in question for the manufacture of Capital goods - Apparently, the appellant declared the quantity of the use of the items in their Cenvat Account which was not disputed by the lower authorities. In such a situation, there is no reason to deny the Cenvat Credit on these items. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of Cenvat Credit on items used for the manufacture of capital goods.

Analysis:
The case involved the appellant, engaged in the manufacture of Sponge Iron, facing a Show Cause Notice proposing to deny Cenvat Credit wrongly availed on various items like M.S. Bar, TMT Bar, Cement, etc., during 2009-10 to 2011-12. The Adjudicating authority disallowed the credit, which was upheld by the Commissioner (Appeals). The main issue was whether these items used by the appellant for manufacturing plant and machinery would be eligible for Cenvat Credit.

The appellant argued that the items were used for construction purposes related to the plant and machinery, citing precedents where such items for manufacturing capital goods were eligible for credit. They provided detailed itemwise information not disputed by the authorities. The Revenue supported the lower authorities' findings.

Upon review, it was found that the appellant had submitted a Chartered Engineer's Certificate and other documents to establish the use of items in manufacturing capital goods. The Adjudicating authority had questioned the correlation between the items and the capital goods, while the Commissioner (Appeals) claimed the appellant did not provide details. However, the appellant had indeed substantiated the use of items through documentation, including quantity declarations in their Cenvat Account, which went unchallenged by the authorities.

The judgment highlighted the importance of the 'user test' for Cenvat Credit eligibility, as per Supreme Court rulings. Contrary to the Commissioner (Appeals) findings, the appellant had indeed submitted necessary documents. The case laws referred to by the Revenue were deemed inapplicable. Consequently, the impugned Order disallowing the credit was set aside, and the appeal was allowed in favor of the appellant. The decision was pronounced on 27.12.2017.