2017 (11) TMI 1281 - AT - Central Excise

CENVAT credit - iron and steel items used for fabrication of various capital goods/plants and machineries/support structures - Held that - an identical issue has come up before the Tribunal in the case of Singhal Enterprises Pvt. Ltd. vs Commissioner Customs & Central Excise, 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 - credit allowed - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved: Dispute over admissibility of Cenvat Credit on iron and steel items used for fabrication of capital goods/plants and machineries/support structures, applicability of User Test to determine eligibility of structural steel items as capital goods.

Analysis:
1. Admissibility of Cenvat Credit on iron and steel items: The appeal pertains to a dispute regarding the admissibility of Cenvat Credit on various iron and steel items used for fabrication of capital goods, plants, machineries, and support structures. The Department had initially disallowed the credit, leading to the filing of the present appeal by the assessee-Appellants. The Tribunal considered a similar issue in a previous case and observed that the credit on welding electrodes was held allowable by several decisions, including High Court judgments. The Tribunal concluded that the appellants were entitled to the credit on welding electrodes, considering them as "Inputs."

2. Applicability of User Test to determine eligibility of structural steel items: The dispute further involved the admissibility of Cenvat Credit on various structural steel items like MS Angles, Sections, Channels, TMT Bar used in the fabrication of support structures for capital goods. The Department sought disallowance citing a Larger Bench decision and an amendment to the definition of "Input." The Tribunal examined the Larger Bench decision and a High Court ruling, which differed on the retrospective application of the amendment. Referring to a Supreme Court judgment, the Tribunal applied the User Test to determine whether the structural items qualified as capital goods. It noted that the structural items were essential for supporting various capital goods like kilns, conveyor systems, and furnaces, ensuring their smooth functioning. Consequently, the Tribunal held that the structural items used in the fabrication of support structures fell within the ambit of "Capital Goods" as per Rule 2(a) of the Cenvat Credit Rules, entitling the assessee-Appellants to the Cenvat Credit.

3. Final Decision: Based on the analysis and previous decisions, the Tribunal set aside the impugned order and allowed the appeal filed by the assessee-Appellants. The judgment emphasized the application of the User Test to determine the eligibility of structural steel items as capital goods, ultimately granting the Cenvat Credit in favor of the appellants.

This comprehensive analysis highlights the key legal interpretations and precedents considered by the Tribunal in resolving the issues related to Cenvat Credit on iron and steel items and the applicability of the User Test in determining the eligibility of structural steel items as capital goods.