2016 (11) TMI 1179 - AT - Central Excise

CENVAT credit - M.S. Channels, Beams, Joists, Rounds, Seats, Angles, Plates, etc. - whether denial of credit on the ground that these items were used for the fabrication or manufacture of items, which have become immovable structures, justified? - Held that - The Tribunal in a recent case of the M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI held that the structural items used in the fabrication of support structures would qualify to be considered as parts of relevant machinery and fall within the ambit of capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004. The amendment carried out in Rule 2(a) to exclude cement, angles, channels, CTD, TMT bars and other items used for construction of factory sheds, building, or laying of foundation or making of structures for support of capital goods cannot be held to be retrospective. Time bar - Held that - the issue involved in the present dispute is one of interpretation of the provisions of Cenvat Credit Rules and various other legal principles. Admittedly, certain contrary views have been taken by the various judicial bodies. In such situation, we find that invoking longer period of demand on the ground of fraud, suppression, willful misstatement, etc. is not tenable. Hence, on the question of time bar also, the present demand is not sustainable. Denial of credit not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility for cenvat credit on iron and steel items used in the fabrication of structures
- Interpretation of Cenvat Credit Rules
- Time bar for issuing show cause notice

Analysis:

Issue 1: Eligibility for cenvat credit on iron and steel items used in the fabrication of structures
The appellants, engaged in cement manufacturing, purchased steel items for fabricating various capital goods in their cement plant. The dispute centered on whether these steel items, used in creating structures for machinery support, qualify for cenvat credit. The Revenue argued that the resulting fabricated items were immovable structures, thus ineligible for credit. However, the Tribunal emphasized that the immovability of the goods was not a criterion for cenvat credit. The Tribunal referred to precedents, including the user test, to determine credit eligibility. The Tribunal also considered a certificate by a Chartered Engineer certifying that the fabricated goods were not permanently fixed to the earth. This certification aligned with Supreme Court decisions supporting credit on steel items used for fabrication. The Tribunal cited various cases, including Singhal Enterprises, to establish that structural items used in fabrication qualify as parts of machinery and fall within the ambit of capital goods.

Issue 2: Interpretation of Cenvat Credit Rules
The Tribunal analyzed the amendment to Rule 2(a) excluding certain items used for construction from cenvat credit eligibility. It held that this amendment was not retrospective, following the decision of the Hon'ble Madras High Court. The Tribunal further referenced the decision in Thiru Arooran Sugar case, emphasizing that the exclusion could not be applied retrospectively. The Tribunal also highlighted the principles laid down in various judgments, including those of the Supreme Court, to support its interpretation of the Cenvat Credit Rules.

Issue 3: Time bar for issuing show cause notice
The demand for the period from March 2007 to July 2009 was contested on the grounds of time bar. The show cause notice was issued well beyond the normal period, raising questions of fraud, suppression, and willful misstatement. The Tribunal, considering the long-standing dispute and conflicting judicial opinions on the matter, ruled that the extended period of limitation was not applicable. The Tribunal concluded that invoking a longer period for demand based on fraud or suppression was untenable in this case. Therefore, the demand was deemed unsustainable both on merits and due to the time bar issue.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, finding in favor of the appellant on both merit and the time bar issue.