2016 (9) TMI 682 - AT - Central Excise

Cenvat Credit on structural steel items - Held that - 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. - Decided in favor of assessee.

Summary

Issues:
1. Entitlement of CENVAT Credit on welding electrodes.
2. Availability of CENVAT Credit on various structural items used for support structures of capital goods.
3. Time bar for raising the demand.

Entitlement of CENVAT Credit on Welding Electrodes:
The appellant argued that welding electrodes should be considered as capital goods, supported by a certificate from an independent Chartered Engineer. Previous judicial pronouncements favored the eligibility of CENVAT Credit on welding electrodes. The Revenue sought to disallow the credit, citing specific cases. The Tribunal reviewed the arguments and precedents, ultimately allowing the CENVAT Credit on welding electrodes as inputs, following established judicial decisions.

Availability of CENVAT Credit on Structural Items:
The dispute centered on the admissibility of CENVAT Credit on structural items like MS Angles, Channels, TMT Bar, etc., used for support structures of capital goods. The lower authority had denied the credit, referencing the Vandana Global Ltd. case and subsequent amendments. The Tribunal considered the Larger Bench decision and related judgments, including a clarification amendment. However, the Tribunal noted that the amendment's retrospective application was debated in the Mundra Ports case. Referring to the Supreme Court's precedent in CCE vs. Rajasthan Spinning & Weaving Mills, the Tribunal applied the "user test" to determine the structural items' classification as capital goods. Concluding that the items were integral to the functioning of capital goods, the Tribunal allowed the CENVAT Credit on structural items.

Time Bar for Raising Demand:
Regarding the time bar issue, the appellant contended that regular disclosure in ER-1 Returns and periodic audits precluded any suppression of information. They also highlighted a past dispute resolved in their favor, suggesting the demand was time-barred. The Tribunal considered these contentions in light of the Proviso to Section 11A of the Central Excise Act, 1944, and the appellant's compliance history. Ultimately, the Tribunal did not uphold the time bar challenge, focusing instead on the substantive issues of CENVAT Credit eligibility.

In the final judgment pronounced on 12/08/2016, the Tribunal set aside the impugned order and allowed the appeal, granting the appellant CENVAT Credit on welding electrodes and various structural items used for support structures of capital goods. The decision was based on detailed analyses of the legal provisions, precedents, and the specific circumstances of the case presented by both parties during the proceedings.