2016 (6) TMI 819 - AT - Central Excise

Cenvat Credit - eligible inputs - appellant had used the various items (MS Plates, Angles etc.,) for fabricating /assembling /erection of plant, machinery and buildings - original authority observed that appellant is not eligible for credit as the subject items are used for construction of building - Held that - the reliance made by authorities below on the case of Vandana Global Ltd. 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) , to disallow the credit on MS items used for machines/equipment is misplaced. - credit availed on MS items used for machinery and equipments is to be allowed. The impugned items used for plant shed, generator shed, fibre/cement storage shed, is not admissible. The credit availed for the purpose of shed is disallowed. The records do not separately show the quantification of credit availed on MS items used for sheds. - Matter remanded back for quantification - Decided partly in favor of assessee.

Summary

Issues:
- Availment of CENVAT credit on MS Plates, MS Chequered Plates, MS Angles, MS Channels as capital goods.
- Eligibility of credit for items used in construction of new plant.
- Interpretation of components, parts, and accessories of capital goods.
- Applicability of user test for determining admissibility of credit.

Analysis:
1. The appellants availed CENVAT credit on various items for their manufacturing activities. The issue revolved around the eligibility of such credit, specifically on MS Plates, MS Chequered Plates, MS Angles, MS Channels, and other items used in the construction of a new plant.

2. The Department alleged irregular credit availed on these items, contending they were used for construction work rather than as capital goods. The original authority upheld the denial of credit, leading to appeals before the Commissioner and subsequently the Tribunal.

3. The appellant argued that the items in question were used for machinery and equipment, making them components, parts, or accessories eligible for credit under relevant provisions. The Circular No. 276/110/96 clarified that such items need not fall under specific chapters to qualify for credit.

4. The Tribunal analyzed past judgments, including the user test, to determine the admissibility of credit. It was established that items enhancing the effectiveness of machinery could be considered accessories or components, even if not falling under traditional capital goods categories.

5. The original authority's conclusion that the items were used for civil construction work was challenged, emphasizing their role in machinery and equipment fabrication. The Tribunal held that credit on items used for machinery and equipment was allowable, while credit for shed construction was disallowed.

6. The Tribunal cited relevant case law to support its decision, highlighting the distinction between support structures for machinery and standalone construction. The judgment clarified that credit availed on MS items used for machinery and equipment was permissible, while credit for shed construction was not.

7. Ultimately, the Tribunal set aside the demand for credit on items used for machinery and equipment, sustained the demand for shed construction items, and annulled the penalties imposed. The decision was based on an interpretation of the items' usage and their classification as components or accessories of capital goods.