2016 (8) TMI 536 - AT - Central Excise

Cenvat credit - allowability - availed on MS angles, channels, beams, plates etc. - used for fabrication of technological structures bridges, supporting to the equipments like reactors, distillation column, heat exchangers, receivers in utility and production blocks, pipe line systems etc. - Held that - I am not able to agree with the view of the Commissioner that the MS items used as support structure for capital goods/parts/components/ are not eligible for Cenvat credit. The use of MS items to manufacture /fabricate capital goods/parts/ accessories has been settled in the cases of Rajasthan Spinning and Weaving Mills and India Cements. While considering the issue the Hon ble Courts have taken the view that the machineries in a factory have to be properly supported and connected. Such structural supports are necessary for the machines to make them function without vibration or movement. In Divis Laboratories Ltd Vs CCE Viskahpatnam 2006 (1) TMI 312 - CESTAT, BANGALORE it was held that the items like angles channels, beams pipes tubes etc. used as parts of technological structures which support a reaction vessel or used in particular equipment in the manufacture of bulk drugs was admissible. Cenvat credit - allowability - items for making canteen sheds - Held that - claim of credit on MS items used for making canteen sheds, is not admissible for the reasons that canteen sheds do not qualify as capital goods as provided in Cenvat Credit Rules, 2004. It then becomes necessary to quantify the amount of impugned item used in the manufacture of canteen shed and shall furnish evidence regarding the quantity of impugned items used in the construction of canteen shed and is also liable to reverse the credit availed on manufacture of canteen shed. Therefore, the credit on MS items used by the appellant can be allowed except for the use in the making of canteen shed. - Decided partly in favour of appellant

Summary

Issues involved:
1. Admissibility of CENVAT credit on MS angles, channels, beams, plates, etc., falling under Chapter heading No. 72 and 73.
2. Determination of whether the impugned goods qualify as capital goods and were utilized in the manufacture of capital goods/components/spares/accessories.
3. Assessment of the eligibility of credit on MS items used for making canteen sheds.

Analysis:
1. The appellants, being manufacturers of bulk drugs and intermediaries, availed CENVAT credit on MS items, leading to a dispute with the department. The original authority disallowed the credit, which was upheld by the Commissioner (Appeals) with a reduced penalty. The appellants contended that the impugned goods were used in the fabrication of capital goods, spares, and accessories. They presented a chartered engineer's certificate and relied on relevant judgments to support their claim.

2. The Learned AR argued against the admissibility of credit, stating that the items did not qualify as capital goods and lacked proof of utilization in the manufacture of relevant components. Additionally, it was highlighted that some items were used in constructing canteen sheds, raising doubts on the eligibility of credit. The Chartered Engineer's certificate confirmed the use of impugned items in fabricating technological structures and supporting various equipment in the production and utility blocks.

3. The Tribunal analyzed the evidence and legal precedents, concluding that the credit on MS items could be allowed except for those used in making canteen sheds. While the items used for supporting capital goods were deemed eligible for credit based on established case law, the use in constructing canteen sheds was considered ineligible. The appellants were directed to provide evidence and reverse the credit availed on MS items used in the canteen shed construction.

In the final order, the Tribunal disallowed the credit on impugned items used for making canteen sheds but allowed the credit on other items, modifying the original order accordingly. The appeal was partly allowed with specific directions for compliance.