2018 (5) TMI 1763 - AT - Central Excise

CENVAT Credit - capital goods - MS Plates, MS checkered plates, MS sheets, MS channels, HR steel coils etc. - Held that - The impugned items in the present appeal were used for fabrication of storage tank. The appellants are engaged in manufacture of denatured ethyl alcohol and such storage tanks are an indispensable item in the manufacturing activity. Without such activity of fabrication using the MS plates, MS sheets, HR coils etc. the storage tank cannot be installed within the factory at the required height to be used in the process of manufacture. The Larger Bench of the Tribunal in the case of Commissioner of Central Excise, Meerut Vs. Modi Rubber Ltd. 2000 (5) TMI 64 - CEGAT, NEW DELHI has held that if the appellants are eligible for credit either under capital goods or inputs, the credit has to be allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of credit on MS plates, MS sheets, HR coils for fabrication of storage tanks.

Analysis:
The appellants, engaged in the manufacture of denatured ethyl alcohol, availed CENVAT credit on duties paid on various items like MS plates, MS checkered plates, MS sheets, MS channels, HR steel coils, etc. A show cause notice was issued as the department believed these goods did not qualify as capital goods for credit. The original authority and Commissioner (Appeals) upheld the demand, interest, and penalties imposed. The appellant argued that the items were used for fabricating storage tanks, crucial in the manufacturing process. They cited relevant case laws and previous Tribunal orders in their favor.

The main issue revolved around the eligibility of credit on MS plates, sheets, and coils used for fabricating storage tanks. The appellant contended that without these items, the tanks essential for the manufacturing process could not be installed within the factory premises at the required height. Citing the decision in the case of Commissioner of Central Excise, Meerut Vs. Modi Rubber Ltd., it was highlighted that if the appellants were eligible for credit under capital goods or inputs, the credit must be allowed. The jurisdictional High Court's ruling in the case of Thiru Arooran Sugars was also cited, emphasizing the user test to determine credit eligibility for MS items. The Tribunal's previous orders in the appellant's favor for different periods were also mentioned.

In the final analysis, the Member (Judicial) found merit in the appellant's arguments and legal references. Considering the crucial role of the MS items in fabricating storage tanks necessary for the manufacturing process, the impugned order was deemed unsustainable. Consequently, the order was set aside, and the appeal was allowed with any consequential relief. The decision was pronounced in open court, providing relief to the appellant regarding the eligibility of credit on MS plates, sheets, and HR coils used in fabricating storage tanks.