2017 (10) TMI 745 - AT - Central Excise

CENVAT credit - various iron and steel items used in the fabrication of Storage Tanks, classified under chapter 73 - Held that - the Hon ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. v. C.C.E. & Cus. 2015 (5) TMI 663 - GUJARAT HIGH COURT held that the definition of capital goods under Rule 2(k) of Cenvat Credit Rules as amended on 07.07.2009 would be applicable only prospectively - Revenue had not disputed the use of the items as mentioned in the impugned order - appeal dismissed - decided against Revenue.

Summary

Issues:
Eligibility of the respondent to avail duty credit on iron and steel items used in fabrication of storage tanks and support structures.

Analysis:
The appeal involved a dispute regarding the eligibility of the respondent to avail Cenvat Credit of duty on various iron and steel items used in the fabrication of Storage Tanks and support structures. The Revenue contended that these items cannot be considered as parts and accessories of capital goods. The ld.AR for the Revenue relied on case laws to support this argument. On the other hand, the respondent's counsel argued that the nature and usage of the iron and steel items were crucial, emphasizing that the items were essential for the functioning of various capital goods like Storage Tanks and Conveyer systems. The respondent relied on the User Test principle and referred to relevant case law to support their stance.

The Commissioner(Appeals) examined the case thoroughly and considered the arguments presented by both sides. The findings of the Commissioner(Appeals) highlighted the importance of determining whether the machinery or capital goods could function without the support structures made of iron and steel. The Commissioner emphasized that the support structures were integral for the functioning of the capital goods and, therefore, should be considered as parts and accessories of the specified Capital Goods. The Commissioner also referred to a circular issued by the Board to support this interpretation.

In the final decision, the Tribunal referred to a judgment by the Hon'ble Gujarat High Court, which clarified the definition of capital goods under the Cenvat Credit Rules. The Tribunal noted that the Revenue did not dispute the usage of the items in question as mentioned in the impugned order. Consequently, the Tribunal rejected the appeal filed by the Revenue, upholding the order of the Commissioner(Appeals) and disposing of the Cross Objection filed by the assessee. The Tribunal's decision was based on the understanding that the iron and steel items were essential for the functioning of the capital goods, and therefore, the respondent was eligible to avail duty credit on these items.