2017 (6) TMI 631 - AT - Central Excise

CENVAT credit - structural items such as MS angles, channels, joists and beams as capital goods - denial on the ground that the said structural steel items falling under Chapter 72 are used for supporting kiln are not covered under the definition of capital goods in terms of Rule 2(a) of the CCR 2004 - Held that - In the case of Singhal Enterprises Pvt Ltd 2016 (9) TMI 682 - CESTAT NEW DELHI , the division bench of this Tribunal has held that the structural steel item such as MS angles, channels, TMT bars etc. used in fabrication of support structure for various capital goods are eligible for CENVAT credit - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against order confirming demand of Cenvat credit
- Eligibility of availed Cenvat credit on structural items
- Interpretation of Rule 2(a) of Cenvat Credit Rules 2004
- Application of the user test for determining capital goods

Analysis:
The appeal was filed against the Commissioner (Appeals)'s order confirming the demand of irregularly availed Cenvat credit of ?1,51,278/- by the appellant. The dispute arose when the appellant availed Cenvat credit on structural items like MS angles, channels, joists, and beams as capital goods, which the department contended were not covered under the definition of capital goods as per Rule 2(a) of the Cenvat Credit Rules 2004. The department issued a show-cause notice demanding the credit back, but the adjudicating authority initially ruled in favor of the appellant. However, the department appealed based on precedents like Vandana Global and Vikram Cement, leading to the Commissioner (Appeals) allowing the department's appeal and setting aside the initial order.

Upon hearing both parties and reviewing the case, it was argued that the impugned order lacked legal sustainability as it did not consider the provisions of Cenvat credit and failed to follow binding judicial precedents. The appellant contended that the disputed structural items were used for the supportive structure of machinery before a relevant rule amendment. Citing cases like Singhal Enterprises Pvt Ltd and Andhra Sugars Ltd, the appellant sought support for their position, while the respondent relied on cases like Saraswati Sugar Mills and Madras Cements Ltd to bolster their argument.

The Tribunal analyzed the issue and found that it had been settled in favor of the appellant by various decisions cited. Notably, in the case of Singhal Enterprises Pvt Ltd, it was established that structural steel items used in the fabrication of support structures for capital goods are eligible for Cenvat credit. The Tribunal referenced the user test applied in previous cases to determine whether the structural items qualified as capital goods, emphasizing the need for support structures for machinery to ensure smooth functioning. Drawing from precedents like CCE Trichy Vs India Cements Ltd, the Tribunal concluded that the impugned order was legally unsustainable and proceeded to set it aside, allowing the appeal of the appellant.

In conclusion, the Tribunal's detailed analysis focused on the eligibility of availed Cenvat credit on structural items, interpreting Rule 2(a) of the Cenvat Credit Rules 2004, and applying the user test to determine the classification of capital goods. By referencing relevant judicial precedents and legal principles, the Tribunal provided a comprehensive explanation for setting aside the impugned order and ruling in favor of the appellant.