2016 (12) TMI 434 - AT - Central Excise

Demand - Cenvat credit - the point of dispute is that the resultant fabricated items became part of structures which are embedded to earth and become immovable, thereby losing the name of goods . Hence, Revenue contends that these items used are outside the purview of capital goods or inputs - Held that - the Hon ble Supreme Court evolved user test to answer the question whether the items falls within the purview of capital goods and held that in the case of Rajasthan Spinning Mills 2010 (7) TMI 12 - SUPREME COURT OF INDIA that steel plates and MS channels used in the fabrication of chimney would fall within the ambit of capital goods - Appeal allowed - decided in favor of the assessee.

Summary

Issues:
Admissibility of Cenvat credit on steel items used in fabrication of capital goods and structures.

Analysis:
The dispute in this case revolves around the admissibility of Cenvat credit on steel items utilized in the fabrication, manufacture, and maintenance of various capital goods and structures. The Commissioner (Appeals) in Jaipur had upheld the demands raised under four Orders-in-Original spanning from July 2006 to May 2009, leading to the present appeals.

The steel structural items were employed for the fabrication and erection of various capital goods and supporting structures in the factory. The contention arose when the department argued that these steel items, once embedded in the earth, lose their status as goods and become immovable property. However, the appellant cited several decisions where Cenvat credit on similar structural items was allowed, emphasizing that the fabricated items were integral components of capital goods.

The Tribunal referred to various precedents and legal principles to determine the eligibility of steel items for Cenvat credit. Notably, the Tribunal cited the "user test" established by the Hon'ble Supreme Court to ascertain whether the items qualify as capital goods. It was highlighted that the use of steel items in the fabrication of capital goods, as in the case at hand, warranted the allowance of Cenvat credit, as per the wide definition of 'capital goods' under the Cenvat Credit Rules, 2004.

Furthermore, the Tribunal analyzed past judgments where steel items like MS plates, angles, and channels were considered eligible for Cenvat credit when used in the erection of various machinery and structures. The Tribunal emphasized that the mere fact that certain steel items were used for providing support to capital goods did not disqualify them from being considered as eligible inputs for Cenvat credit.

In conclusion, the Tribunal found that the facts of the present case aligned with previous decisions where Cenvat credit on steel items for fabrication of capital goods was allowed. The Tribunal distinguished the facts of the present case from the case cited by the Revenue, ultimately allowing the appeal and setting aside the impugned order.

Therefore, the Tribunal ruled in favor of the appellant, allowing the appeal and granting consequential relief as deemed necessary.