2016 (12) TMI 433 - AT - Central Excise

Cenvat credit on M.S. Plates Angles - Demand - Rule 2 of Cenvat Credit Rules 2004 - Held that - the strucutal steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods such as kiln material handling conveyor system furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly the goods fabricated using such structurals will have to be considered as parts of the relevant machines - Accordingly 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 - Appeal allowed - decided in favor of the assessee.

Summary

Issues:
Eligibility of availing cenvat credit on steel items used in fabrication of structures within factory premises.

Analysis:
The appeals by the Revenue challenged the eligibility of the respondents to avail cenvat credit on steel items like plates, angles, channels used in fabricating structures within their units. The Revenue argued that these structural items were neither inputs nor capital goods as per Rule 2 of Cenvat Credit Rules, 2004, emphasizing that immovable structures attached to earth are not goods under the Central Excise Act. However, the Appellate Tribunal examined the usage of these steel items and concluded that they were integral to the technological structure of capital goods for manufacturing finished excisable products. The fabricated items served as support to machinery, essential for the manufacturing process, and were interconnected within the manufacturing facility. The Tribunal also referenced various case laws supporting the eligibility of construction material related to machinery for cenvat credit.

The Tribunal's analysis included references to decisions such as Jindal Vijayanagar Steel Ltd. and J.K. Cement Works, highlighting that support structures for machinery were considered capital goods eligible for credit. Additionally, the Tribunal cited the Apex Court's decision in M/s. Jawahar Mills Ltd. to emphasize that construction material related to machinery used in the plant is entitled to cenvat credit. Furthermore, the Tribunal examined the eligibility of Oxygen Gas and Welding Electrodes, concluding that if used in the manufacture of capital goods within the factory premises, they are admissible for cenvat credit.

In a similar vein, the Madras High Court in Indian Cements Ltd. cases upheld the availability of credit on steel items when used in fabricating structures supporting machinery within the factory. The Tribunal's consistent application of this principle was evident in the Singhal Enterprises Pvt. Ltd. case, where the Tribunal reiterated the eligibility of cenvat credit on structural steel items used for support structures holding various capital goods.

The Tribunal's final decision dismissed the Revenue's appeals, affirming the eligibility of the respondents to avail cenvat credit on the steel items used in fabricating structures within their factory premises. The analysis encompassed legal precedents, case laws, and a thorough examination of the usage and significance of the steel items in relation to capital goods and manufacturing processes.