2017 (8) TMI 694 - AT - Central Excise

CENVAT credit - inputs - whether the appellant manufacturer of V. P. Sugar and molasses have rightly availed Cenvat credit of ₹ 99,94,125/- during the period 2005-06 to August 2008 on goods like M.S. Plates, M.S. Channels, H. R. Coils, M.S. Angles, etc. by treating these goods as inputs? - Held that - the appellant is entitled to Cenvat credit on items of iron and steel in question as the same have been used for fabrication of capital goods, for repair and maintenance of capital goods, for fabrication of staging structures and supporting structures etc., as no excisable products can be manufactured without the same - the amended definition of inputs under CENVAT credit Rules provides for availability of CENVAT credit to a manufacturer on all items utilized by the manufacturer in the factory for or of production - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant manufacturer rightly availed Cenvat credit on certain goods treated as inputs.

Analysis:
The appeal revolved around the question of whether the appellant, a manufacturer of V. P. Sugar and molasses, correctly availed Cenvat credit amounting to ?99,94,125/- during the period 2005-06 to August 2008 on goods like M.S. Plates, M.S. Channels, H. R. Coils, M.S. Angles, etc., by considering them as inputs. The Revenue contended that these iron and steel articles were used in the construction of civil structures and platforms, thus not falling under the definition of input as per Rule 2(k) of CCR, 2004. A show-cause notice (SCN) was issued proposing disallowance and recovery of the Cenvat credit amount along with interest and penalty.

The appellant argued that the iron and steel items were used in the fabrication of various machines and equipment necessary for the manufacturing process, such as molasses storage tanks, bagasse handling systems, flush tanks, evaporator bodies, pipe lines, pans, filter clarification systems, and more. Additionally, some items were used for staging/supporting structures and for captive consumption within the factory workshop. The appellant also highlighted that the machinery and equipment in a sugar factory are installed at different stages or heights for material transfer, emphasizing the essential role of these items in the manufacturing process.

The SCN was adjudicated, confirming the proposed demand along with interest and a penalty for the alleged contravention of relevant rules. However, the appellant appealed to the Tribunal, citing precedents such as a decision by the Hon'ble Madras High Court and a previous order by a co-ordinate Bench of the Tribunal, which supported the entitlement to Cenvat credit on items of iron and steel used in the fabrication of capital goods and repair thereof, essential for the manufacturing process.

After considering the arguments from both sides, the Tribunal held that the appellant was indeed entitled to Cenvat credit on the iron and steel items in question. The Tribunal emphasized that these items were crucial for the fabrication of capital goods, repair and maintenance of machinery, and the construction of staging and supporting structures without which the manufacturing of excisable products would not be possible. The Tribunal also noted that the amended definition of 'inputs' under the Cenvat credit Rules allowed for credit on all items used by the manufacturer in the factory for production purposes. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits as per the law.