2017 (3) TMI 927 - AT - Central Excise

CENVAT credit - MS items - Held that - MS items were used for fabrication of molasses storage tank. Undisputedly such tank is necessary and is integral part of the manufacturing process carried out the factory. The Chartered Engineer certificate states that the MS items were used for fabrication of molasses storage tank and also gives the quantity of MS items used for fabrication of the same - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of credit on MS items.

Analysis:
The case involves the disallowance of credit on MS items availed by the appellants engaged in the manufacture of sugar and molasses. The appellants were registered with the Central Excise Department and had availed CENVAT credit on various items including MS sheets, chequered coils, HR plates coils, angles, channels, etc. A show-cause notice was issued alleging irregular availment of credit, leading to the confirmation of demand, interest, and penalty by the original authority, which was upheld by the Commissioner (Appeals), prompting the appeal.

The main argument presented by the appellant was that the MS items were used for the fabrication of a molasses storage tank, which was an essential capital good for the functioning of the plant. The appellant contended that the denial of credit based on the argument that MS items, when fixed to the earth, become immovable property, was unjustified. The appellant supported their claim with a Chartered Engineer certificate confirming the use of MS items for the construction of the tank, along with entries in the RG23 registers indicating the utilization of the items for the fabrication of capital goods only.

In response, the Department reiterated its findings, stating that the appellant failed to provide sufficient evidence to prove the utilization of MS items for the molasses storage tank fabrication. The Department questioned the reliability of the Chartered Engineer certificate, highlighting that it was issued after the show-cause notice.

After considering the submissions, the tribunal noted the importance of the molasses storage tank in the manufacturing process and the Chartered Engineer's confirmation of the use of MS items for its fabrication. The tribunal observed that the Department did not establish any diversion of MS items and referred to a relevant judgment where MS items used for capital goods fabrication were deemed eligible for credit. Consequently, the tribunal found the disallowance of credit unjustified, setting aside the impugned order and allowing the appeal with any consequential reliefs.