2017 (8) TMI 1702 - AT - Central Excise

CENVAT Credit - capital goods/inputs - MS plates, angles, channels, beams and rounds - rule 2 of CENVAT Credit Rules, 2004 - HELD THAT - The use of steel items for fabrication of structures and structures for bearing machinery would appear to be excluded from the definition of capital goods. However, as per Explanation 2 in rule 2(k) of CENVAT Credit Rules 2004, such goods, if used for manufacture of capital goods which are further used in the factory of the manufacturer, are to be considered as inputs and the definition of capital goods in the said rules includes moulds. Therefore, the contention of the appellant that the inputs, on which CENVAT credit has been availed, are used in the manufacture of moulds cannot be dismissed without proper examination. The lower authorities have failed to do so. The matter remanded back to the original authority for subjecting the claim of the appellant to the test of the definitions of input and capital goods in CENVAT Credit Rules, or 2004 - appeal allowed by way of remand.

Summary

Issues: Entitlement to CENVAT credit on steel products for manufacturing refractory materials.

In the case of M/s Castwell Industries Pvt Ltd, the main issue revolved around the entitlement to avail CENVAT credit of &8377; 75,908 on steel products procured in specific financial years for manufacturing refractory materials. The dispute arose from the original authority's decision against the appellant, which was upheld in the appeal, leading to a demand for recovery, interest, and penalty.

The appellant claimed that the steel products were used to produce pre-cast prefired shapes and sizes of refractory lining tailored to customer needs. They argued that the steel items were utilized to make moulds for manufacturing finished products supplied to a specific customer. However, the original authority and the impugned order found the evidence presented by the appellant unconvincing, stating that the steel items did not meet the criteria of capital goods or inputs as defined in the CENVAT Credit Rules, 2004. The authorities also pointed out contradictions in the appellant's contentions, further weakening their case.

Upon hearing the arguments from both sides, it was noted that while the use of steel items for certain purposes might not meet the definition of capital goods, there was a provision in the CENVAT Credit Rules 2004 that considered goods used for manufacturing capital goods, including moulds, as inputs. The failure of the lower authorities to properly examine whether the steel items were indeed used in the manufacture of moulds led to the decision to set aside the impugned order and remand the matter back to the original authority for a thorough assessment based on the definitions of input and capital goods in the CENVAT Credit Rules, 2004.

In conclusion, the judgment highlighted the importance of a detailed examination of the usage of inputs in manufacturing processes to determine their eligibility for CENVAT credit, emphasizing the need for adherence to the definitions and provisions outlined in the relevant rules governing such credits.