2016 (12) TMI 1450 - AT - Central Excise

Cenvat credit - Penalty - Held that - In the case of C.C.E., Jaipur sv. Rajasthan Spinning & Weaving Mills 2010 (7) TMI 12 - SUPREME COURT OF INDIA wherein it was held that Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S. Channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q - Appeal allowed.

Summary

Issues:
Appeal against disallowance of cenvat credit and penalty imposition for the use of certain goods in manufacturing.

Analysis:
The appellant, M/s Aarti Sponge & Power Limited, appealed against the disallowance of cenvat credit amounting to ?73,19,594 and the imposition of an equivalent penalty by the Commissioner, Raipur. The dispute arose from the use of CTD Bars, Angles, Channels, Plates, Joists, Flats, etc., in the manufacturing process of various technical structures for the final products of the appellant. The Department contended that these goods were neither inputs nor capital goods, leading to the issuance of a show cause notice and subsequent adverse order against the appellant.

The appellant argued through their advocate, citing various legal precedents, that the iron and steel structural items used in the manufacturing process were eligible for CENVAT Credit. They relied on cases such as Dhampur Sugar Mills Ltd. vs. C.C.E., Shabad Cooperative Sugar vs. C.C.E., and others to support their claim. The Revenue, represented by their A.R., reiterated the findings of the impugned order.

Upon careful consideration of the submissions and case laws cited, the Tribunal referred to the Hon'ble Supreme Court's decision in C.C.E., Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. The Tribunal applied the User Test established by the Supreme Court in previous cases to determine the eligibility of the goods in question for cenvat credit. The Tribunal found that the steel items used by the appellant for manufacturing various capital goods and technical structures were integral to the production process of the final products. Citing the observations from the Rajasthan Spinning & Weaving Mills case, the Tribunal concluded that the steel plates and M.S. channels used in fabrication were indeed capital goods as per Rule 57Q. Consequently, the impugned order disallowing the cenvat credit and imposing a penalty was set aside, and the appeal was allowed in favor of the appellant.

In conclusion, the Tribunal's decision, pronounced on 19.12.2016, provided consequential relief to the appellant by overturning the disallowance of cenvat credit and penalty imposition based on the application of legal principles and precedents established by the Hon'ble Supreme Court.