2018 (9) TMI 1987 - AT - Central Excise

CENVAT Credit - inputs used in the manufacture of supporting structures of capital goods - Angles, Channels, Chequired Coils, CTD Bar, GC Sheet, HR Sheet/Plate, Joist, MS Beam, MS Flat, MS Rod, MS Rounds, Plate TMT Bar etc. - HELD THAT - It is observed from the SCN that the steel materials have been used to make gigantic steel structures to participate in the manufacturing process of Sponge Iron and M.S. Billet carried out by them and without them the manufacture process could not be completed - The issue to be decided in this appeal is regarding availability of Cenvat credit on various structural items such as Angles, Channels, Chequired Coils, CTD Bar, GC Sheet, HR Sheet/Plate, Joist, MS Beam, MS Flat, MS Rod, MS Rounds, Plate TMT Bar etc. which have been used in making support structures of the Capital Goods. The Learned Commissioner (Appeals) has decided the appeal in favour of the Department by relying upon the decision of the Larger Bench of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) . The aforesaid decision of the Larger Bench was considered by the Hon ble Court of Gujrat in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2015 (5) TMI 663 - GUJARAT HIGH COURT wherein it was observed that the amendment made on 7.7.2009 cannot be held to be retrospective and as such applicable only prospectively. The controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS LTD. 2010 (7) TMI 12 - SUPREME COURT , wherein the Hon ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the user test evolved by the Apex Court in the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS JAWAHAR MILLS LTD. 2001 (7) TMI 118 - SUPREME COURT , which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the user test to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods - the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of Capital Goods includes, components, spares and accessories of such capital goods. Accordingly, applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat Credit under Rule 14 of the Cenvat Credit Rules, 2004
- Determination of whether structural items qualify as 'Capital Goods'
- Interpretation of the retrospective nature of the CENVAT (Amendment) Rules, 2009

Analysis:
1. The case involved the disallowance of Cenvat Credit under Rule 14 of the Cenvat Credit Rules, 2004, where the Adjudicating Authority disallowed a portion of the credit claimed by the appellant for the purchase of capital goods. The Department filed an appeal against the original order, leading to the Assessee appealing to the Tribunal.

2. The appellant argued that the capital goods purchased, including various steel materials, were essential for the expansion of their manufacturing units. They claimed Cenvat Credit on these inputs, stating they were used in the manufacture of specific capital goods. The appellant emphasized the necessity of these materials for the project's efficiency and technical requirements.

3. The Tribunal reviewed the case and observed that the disputed inputs were utilized in the fabrication of support structures for capital goods like chimneys, cooling towers, and various technological structures. The appellant explained the purpose and function of these support structures in the manufacturing process, highlighting their integral role in the production of M.S. Billets.

4. The Tribunal considered the 'user test' established by previous judgments to determine whether the structural items qualified as capital goods. By applying this test, it was concluded that the structural items used in the fabrication of support structures fell within the definition of 'Capital Goods' under Rule 2(a) of the Cenvat Credit Rules. Therefore, the appellant was entitled to claim Cenvat credit on these items.

5. The Tribunal referenced relevant judgments, including decisions by the High Courts of Madras and Chhatisgarh, which supported the appellant's position regarding the availability of Cenvat Credit on structural items used in the manufacturing process. Additionally, the Tribunal cited a case where the Gujarat High Court ruled against retrospective application of certain amendments to the CENVAT Credit Rules.

6. Ultimately, the Tribunal set aside the impugned order disallowing the Cenvat Credit and allowed the appeal filed by the appellant. The decision was based on the consistent interpretation of the law by various High Courts and the Tribunal, affirming the appellant's right to claim Cenvat Credit on the disputed structural items.