2018 (7) TMI 1193 - AT - Central Excise

CENVAT Credit - capital goods - M.S. Steel Tube M.S. Black Tube H.R. Plate M.S. Plate/Pipe Hot Strip Mill Plate and other similar items - Held that - It is admitted fact that the appellants have used the items under dispute in fabrication of capital goods which have been further used in production of excisable goods - the appellant is entitled to Cenvat credit on the items under dispute - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Entitlement to Cenvat credit on items used during a specific period.
2. Interpretation of Cenvat Credit Rules 2004 regarding the usage of iron and steel items in fabrication or repair of capital goods.
3. Disallowance of Cenvat credit by the Commissioner (Appeals) based on the definition of "Capital Goods" and reliance on a previous judgment.

Analysis:

Issue 1: Entitlement to Cenvat credit on specific items
The appeal questioned the entitlement of the appellant to Cenvat credit on items like M.S. Steel Tube, M.S. Black Tube, H.R. Plate, M.S. Plate/Pipe, Hot Strip, Mill Plate, etc., used during the period April 2008 to March 2011. The show cause notice alleged a shortfall in Cenvat credit and proposed penalties. The appellant argued that the items were used for fabrication and repairs of plant and machinery, falling under Section 2(k) or Section 2(a)(A) of the Cenvat Credit Rules 2004. The appellant provided detailed usage descriptions and tariff headings to support their claim.

Issue 2: Interpretation of Cenvat Credit Rules 2004
The appellant contended that the items were used in fabrication of capital goods or in repair and maintenance of existing capital goods, making them eligible for Cenvat credit under the relevant sections of the Cenvat Credit Rules 2004. The adjudicating authority supported the appellant's claim, emphasizing that the items were used for maintenance and repairs of capital goods, not for laying foundations or supporting structures. The authority's findings favored the appellant's eligibility for Cenvat credit on the disputed items.

Issue 3: Disallowance of Cenvat credit by the Commissioner (Appeals)
The Commissioner (Appeals) disallowed the Cenvat credit, arguing that items of iron and steel used for repair and maintenance lose their identity and fail to qualify as "Capital Goods" as per Rule 2(a)(A) of the Cenvat Credit Rules 2004. The Commissioner relied on a judgment of the Hon'ble Andhra Pradesh High Court to support this decision. However, the Commissioner refrained from imposing penalties due to conflicting interpretations of the law by different courts.

Final Decision
After hearing both parties, the Tribunal found that the appellant had indeed used the disputed items in fabrication of capital goods further used in production of excisable goods. Therefore, the Tribunal held that the appellant was entitled to Cenvat credit on the items in dispute. Consequently, the appeal was allowed, and the impugned Order-in-Appeal disallowing the credit was set aside, granting the appellant the right to avail Cenvat credit as claimed.

This comprehensive analysis highlights the key legal issues, arguments presented, authorities' decisions, and the final judgment of the Appellate Tribunal CESTAT ALLAHABAD regarding the entitlement to Cenvat credit on specific items used by the appellant.