2017 (9) TMI 1113 - AT - Central Excise

CENVAT credit - capital goods - whether the appellants are eligible to avail CENVAT credit on the duty paid on angles, channels, beams, girders plats, sheets, coils, bars, cements etc. used for fabrication of structures for machinery, factory, roads etc. during the period January 2009 to December, 2009? - Held that - cement has been utilized for building road and other purposes and therefore, not eligible to credit. As far as admissibility of CENVAT credit on the duty paid inputs viz. angles, channels, beams etc. used in the fabrication of machinery, in principle, the same is admissible as per the judgment of the Tribunal in the case of Singhal Enterprises Pvt. Ltd. vs. C.Cus. & C. Ex., Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI , where it was held that applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - However, from the record it is not clear the exact quantity of angles, channels, beams etc. that were used in the fabrication of machinery and structure of capital goods, hence to ascertain the said factual position, the matter is remanded to the adjudicating authority for scrutiny of the claim of the Appellant. Appeal allowed by way of remand.

Summary

Issues:
Whether the appellants are eligible to avail CENVAT credit on duty paid on various steel items used for fabrication of structures for machinery, factory, roads, etc. during a specific period.

Analysis:
The central issue in this case revolves around the eligibility of the appellants to claim CENVAT credit on duty paid on angles, channels, beams, and other steel items used in the fabrication of structures for machinery and capital goods. The appellant's advocate argued that these items are admissible for credit under Rule 2(k) of the Cenvat Credit Rules, 2004, citing a precedent from Singhal Enterprises Pvt. Ltd. vs. C.Cus. & C. Ex., Raipur. On the other hand, the Respondent-Revenue contended that the appellant had availed inadmissible credit on these items used in various structures. The Member (Judicial) analyzed the materials used, noting that while cement was not eligible for credit due to its use in building roads, the admissibility of CENVAT credit on steel items used in machinery fabrication was supported by the precedent of Singhal Enterprises Pvt. Ltd. vs. C.Cus. & C. Ex., Raipur.

The Member referred to the decision of the Larger Bench in Vandana Global Ltd.'s case, which stated that even if iron and articles were used as supporting structures, they would not be eligible for credit. However, considering the retrospective nature of an amendment made in 2009, the Member found that the decision of the Larger Bench was not applicable retrospectively, as clarified by the Hon'ble Gujarat High Court in Mundra Ports & Special Economic Zone Ltd.'s case. Additionally, the Member cited the Supreme Court's decision in CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., where the "user test" was applied to determine the eligibility of steel plates and MS channels used in fabricating chimneys for diesel generating sets, ultimately allowing the credit under Rule 57Q of the Central Excise Rules, 1944.

Applying the "user test" to the present case, the Member concluded that the structural items used in fabricating support structures for capital goods fell within the definition of "Capital Goods" under Rule 2(a) of the Cenvat Credit Rules. The Member highlighted that these structural items were essential for the smooth functioning of various capital goods like kilns, conveyors, and furnaces, as they needed suitable support. Therefore, the fabricated goods using such structural items were considered parts of the relevant machines, making them eligible for CENVAT credit.

However, due to the lack of clarity regarding the exact quantity of steel items used in fabrication, the matter was remanded to the adjudicating authority for further scrutiny. Consequently, the impugned order was modified, and the appeal was partly allowed, subject to the verification of the quantity of steel items used in the fabrication of machinery and capital goods.