2018 (7) TMI 1199 - AT - Central Excise

CENVAT Credit - various items of boiler structure, fabricated channels for economiser structure and sheeting, pipes and fittings for boiler structure, structure granting, foundation studs with nuts and washers etc., received in the factory of the appellant - C.B.E.C. Circular dated 02/04/2012 and 18th May, 2012. Held that - The items like boiler structure, etc., have also been supplied after fabrication by M/s Walchand Industries Ltd., who have also supplied the boiler. Thus these items are not angles, channels, plates, joist etc., falling under Chapter 72/73 - These items being components and accessories of the boiler will qualify under Chapter 84 along with the boiler. All the items in question are components and accessories of capital goods which shall qualify as capital goods. Even otherwise if any item otherwise qualifies as an input under Rule 2(k) of Cenvat Credit Rules, the same is also available for Cenvat credit. Admittedly all the goods in question have been used by the manufacturer-appellant in their factory of production - the court below have erred in observing that these materials/goods/components/structures have been used in repair & maintenance of old plant and machinery - there is a mistake of fact in the orders of the court below. The appellant is entitled to CENVAT credit of ₹ 41,18,310/- under dispute - appeal allowed - decided in favor of appellant.

Summary

Issues:
Eligibility of Cenvat credit on various items of boiler structure, fabricated channels, sheeting, pipes, and fittings received during 2006-07 and 2007-08.

Analysis:
The appellant, engaged in the manufacture of V.P. Sugar and Molasses, installed new machinery during 2006-07, including a boiler and other equipment. They took credit on various items essential for installing the machinery, amounting to ?41,18,310. However, during an audit, the Revenue objected to the credit, leading to its reversal. The appellant sought re-credit, but the Assistant Commissioner denied it, stating no provision allowed re-credit after reversal.

A show cause notice in 2010 challenged the Cenvat credit, alleging the items were not covered under capital goods or inputs definitions. The Revenue claimed the items were used for repair, maintenance, and modification, proposing penalties. The Order-in-Original confirmed the disallowance, with penalties, which the Commissioner (Appeals) upheld in 2011.

The Tribunal previously allowed the Cenvat credit based on a CBEC Circular, classifying structural components as part of the boiler system. However, the High Court overturned this decision, directing a fresh review based on applicable Circulars. The subsequent Circular clarified that while credit was available for parts of a boiler, it was not admissible for structural components supporting capital goods.

Considering the evidence, the Tribunal found the items in question, including boiler structures and accessories, qualified as capital goods. Referring to a Madras High Court judgment, it held that items like MS Rod, sheet, channels, and plates used for machinery erection were eligible for Cenvat credit. The Tribunal allowed the credit of ?41,18,310, setting aside the previous orders and granting consequential benefits to the appellant.