2016 (12) TMI 989 - AT - Central Excise

Denial of CENVAT credit - steel items such as MS Plates, Angles, Channels etc which has been used in fabrication of plant and machinery - welding electrodes which has been used for repair and maintenance of plant and machinery - denial on the ground that these two items are neither inputs nor capital goods to avail Cenvat credit - Held that - I find that in the case of Singhal Enterprises Pvt. Ltd. 2016 (9) TMI 682 - CESTAT NEW DELHI this Tribunal has examined the case also and thereafter arrived at the decision that appellant is entitled to avail Cenvat credit on welding electrodes which has been used in repair and maintenance of plant and machinery. Therefore, relying on the decision of the Tribunal in the case of Singhal Enterprises Pvt. Ltd., I hold that appellant has correctly availed Cenvat credit on welding electrodes. CENVAT credit on steel items - Held that - In fact these structures wagon, loading system is the integral part of the plant and machinery and same has been used for transportation of finished goods. In these circumstances, user tests qualifies that these items have been used for fabrication of plant and machinery, therefore, appellant is entitled for Cenvat credit. The Cenvat credit on steel items and welding electrode is allowed - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Entitlement to Cenvat credit on welding electrodes used for repair and maintenance of plant and machinery.
2. Entitlement to Cenvat credit on steel items used in the fabrication of plant and machinery.

Analysis:

Issue 1: Entitlement to Cenvat credit on welding electrodes:
The Tribunal referred to the case of Singhal Enterprises Pvt. Ltd. vs. CC & CE, Raipur and highlighted that various decisions have allowed Cenvat credit on welding electrodes used for repair and maintenance purposes. The Tribunal also cited judgments from High Courts, such as Chhattisgarh and Rajasthan, supporting the allowance of such credit. Additionally, the Tribunal relied on the case of Dwarikesh Sugar Industries Ltd. vs. CCE, Meerut to conclude that the appellant is entitled to avail Cenvat credit on welding electrodes used in repair and maintenance activities. Therefore, the Tribunal held that the appellant correctly availed Cenvat credit on welding electrodes.

Issue 2: Entitlement to Cenvat credit on steel items:
The Tribunal examined whether the appellant is entitled to avail Cenvat credit on steel items used in the fabrication of plant and machinery. Referring to the case of Singhal Enterprises Pvt. Ltd., the Tribunal discussed the user test established by the Apex Court in the case of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. The user test determines whether goods can be classified as capital goods. Applying this test, the Tribunal found that the structural steel items used in the fabrication of support structures for capital goods qualify as capital goods under Rule 2(a) of the Cenvat Credit Rules. The Tribunal rejected the Revenue's argument that these structures had become immovable property, emphasizing that they were integral parts of the plant and machinery used for transportation of finished goods. Consequently, the Tribunal held that the appellant is entitled to Cenvat credit on steel items used in the fabrication of plant and machinery.

In conclusion, the Tribunal allowed the Cenvat credit on welding electrodes and steel items, setting aside the impugned order and allowing the appeal.