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2017 (1) TMI 359 - AT - Central ExciseCENVAT credit - various steel items - Held that - Tribunal in various decisions held that Cenvat credit on MS items cannot be denied on the ground of their classification or the capital goods when fabricated getting embedded to the earth for operational reasons. In Monnet Ispat & Energy Limited vs. CCE, Raipur 2016 (1) TMI 917 - CESTAT NEW DELHI , it was held that Cenvat credit was taken on the steel items when they are used for fabrication of components, accessories, support items, the credit cannot be denied on the ground that the final product are embedded to earth - in the present case, various disputed items on which credit has been taken were either specifically classified as parts and components of capital goods or specifically included in such category complying with User Test laid down by the Hon ble Supreme Court in CCE, Coimbatore vs. Jawahar Mills Limited 2001 (7) TMI 118 - SUPREME COURT OF INDIA . Denial of CENVAT credit not sustainable - appeal allowed - decided in favor of assessee.
Issues: Eligibility of Cenvat credit for duty paid on steel items.
Detailed Analysis: 1. The dispute in the present appeal pertains to the eligibility of the appellant for Cenvat credit of duty paid on various steel items during the period from February 2007 to September 2008. The Original Authority concluded that the appellants are not eligible for Cenvat credit amounting to &8377; 4,49,64,397 and imposed a penalty of an equivalent amount as per Rule 15 of Central Excise Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 2. The appellant contended that the credit was availed on various components of capital goods used in the erection of a Power Plant. They argued that the components and materials used were not disputed, and the credit was denied based on the claim that these items became immovable property after use in the factory. The appellant emphasized that the eligibility of credit should be determined at the stage of receiving and using duty paid items. 3. The appellant's power plant consisted of various machinery categorized as capital goods, and the components and accessories of machinery were fabricated and installed by engaging a contractor. The appellant argued that the credit on these components should not be denied based on the immovability of the machinery, as the focus should be on the eligibility of various components and accessories of such capital goods for credit. 4. The Tribunal noted that the denial of credit by the Original Authority was based on the immovability of capital goods fabricated by the appellants. However, the Tribunal emphasized that the movability of a particular structure is not a restriction in the definition of capital goods. The key consideration should be whether duty paid items brought in by the appellant were used in components or accessories of identified capital goods, justifying credit eligibility. The Tribunal referred to various judicial decisions, including the User Test proposed by the Supreme Court in determining the eligibility of items for Cenvat credit. 5. The Tribunal highlighted that in previous decisions, Cenvat credit on steel items was not denied based on their classification or when fabricated items were embedded in the earth for operational purposes. The Tribunal referenced specific cases to support the eligibility of credit on structural steel items used in the fabrication of support structures for capital goods. 6. The Tribunal discussed a recent decision and emphasized that structural steel items used in the fabrication of support structures should be considered as parts of relevant machines, falling within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules. The User Test was applied to determine the eligibility of such items for credit. 7. The Tribunal concluded that the denial of credit to the appellant was not sustainable, as the Original Authority did not conduct a detailed examination of the use of items for which credit was availed. The Tribunal set aside the impugned order and allowed the appeal. This detailed analysis covers the issues related to the eligibility of Cenvat credit for duty paid on steel items as discussed in the judgment by the Appellate Tribunal CESTAT NEW DELHI.
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