2018 (7) TMI 240 - AT - Central Excise

CENVAT Credit - inputs/capital goods - TMT bars used in the installation of the capital goods - Held that - The decision of this Tribunal in the case of M/s Singhal Enterprises Pvt. Ltd. Vs. Commr. of Customs & Central Excise, Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI , is squarely applicable to the instant case, 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. In the instant case, the fixation of the said capital goods is critical for the functioning of the machineries, without which the process of manufacture cannot be carried out - Credit on such capital goods cannot be denied to the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of Cenvat credit on TMT bars used in the installation of capital goods
- Classification of TMT bars as inputs or capital goods
- Applicability of previous tribunal decisions and High Court judgments
- Interpretation of the 'user test' for categorizing goods as capital goods

Analysis:
The appeal pertains to the denial of Cenvat credit on TMT bars used in the installation of capital goods by the appellant, a manufacturer of excisable goods. The dispute arose when the adjudication authority proposed to deny Cenvat credit amounting to a specific sum availed by the appellant. The Commissioner (Appeals) upheld the decision, leading to the present appeal before the Tribunal.

The main contention raised by the department was that TMT bars did not qualify as inputs or capital goods under the Cenvat Credit Rules. The Revenue argued that since structural items become immovable property after installation, the credit on such items becomes inadmissible. The adjudication authority relied on a specific case law to support this argument.

However, the Tribunal found that the decision in the case of M/s Singhal Enterprises Pvt. Ltd. was directly applicable to the present case. Additionally, the Tribunal noted that the decision in the case of Vandana Global Ltd., which was relied upon by the lower authorities, was no longer valid in light of various High Court decisions.

The Tribunal referenced the 'user test' outlined in a Supreme Court judgment to analyze the usage of iron and steel items in determining their classification as capital goods. It was emphasized that the fixation of the capital goods in question was critical for the functioning of the machinery, without which the manufacturing process could not be carried out. Consequently, the Tribunal concluded that the credit on such capital goods could not be denied to the appellant.

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal filed by the appellant. The judgment serves as a significant precedent in interpreting the classification of goods as capital goods and upholding the rights of manufacturers to claim Cenvat credit in similar cases.