2018 (11) TMI 967 - AT - Central Excise

CENVAT Credit - inputs/capital goods - cement and various structural articles used by the appellant - construction of foundation of machinery - Held that - The decision in the case of Vandana Global 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) relied solely to admissibility of credit on angles, joists, beams, channels, bars, flats, etc. which go into fabrication of construction for support of the capital goods. The High Court of Chhattisgarh observed that the credit on such items would be admissible. Similar logic was followed by Hon ble High Court of Gujarat in the case of Mundra Ports and Special Economic Zone 2015 (5) TMI 663 - GUJARAT HIGH COURT while allowing credit on cement and steel used in the construction of jetties. Jetty is used to provide port service and under that circumstance, it is a capital good directly used for the provision of services. The Show Cause Notice essentially charges that these goods are used for construction and therefore, cannot be considered as capital goods. The claim of the credit needs to be tested as per the user test prescribed in the decision of the Hon ble Apex Court in the case of Jawahar Mills 2001 (7) TMI 118 - SUPREME COURT OF INDIA - the issue is remanded to original adjudicating authorities to examine the exact use of the goods and test the admissibility of credit. Appeal allowed by way of remand.

Summary

Issues involved:
Denial of Cenvat credit on cement and structural articles used by the appellant.

Analysis:
1. Admissibility of Cenvat credit:
The appellant, Essar Steel Ltd., filed an appeal against the denial of Cenvat credit on cement and steel materials used for machinery foundation. The appellant's counsel argued citing precedents from various High Courts and Tribunals supporting the admissibility of credit on such items. However, the respondent's counsel contested the claim relying on different judgments. The Tribunal observed that the admissibility of credit depends on the actual use of the goods, as highlighted in the case of Ispat Industries Ltd. vs. CCE. The Tribunal differentiated between using cement and steel for machinery support structures versus building construction, where credit admissibility varies. The decision in the case of Vandana Global was referenced to emphasize admissibility based on the purpose of use, as seen in the judgments of High Courts.

2. Legal interpretation and precedents:
The Tribunal referred to various legal interpretations and precedents to determine the admissibility of Cenvat credit on construction materials. The decision in the case of Ispat Industries Ltd. vs. CCE highlighted the importance of the actual use of structural items in relation to machinery functioning. The Tribunal emphasized the need to examine the exact use of goods to test the admissibility of credit, aligning with the principles laid down by the Hon'ble Apex Court in the case of Jawahar Mills. The Show Cause Notice charged that the goods were used for construction, necessitating a user test as per legal precedents to determine credit admissibility.

3. Remand for further examination:
Considering the legal principles and precedents, the Tribunal modified the impugned order and remanded the issue to the original adjudicating authorities. The authorities were directed to examine the exact use of the goods and test the admissibility of credit in line with the decision of the Hon'ble Apex Court in the case of Jawahar Mills. The need for a detailed examination of the actual use of cement and tor steel to determine their classification as capital goods was emphasized, aligning with legal interpretations and precedents.

In conclusion, the judgment delves into the nuanced interpretation of Cenvat credit admissibility on construction materials based on their actual use, drawing from legal precedents and principles established by various High Courts and the Hon'ble Apex Court. The remand for further examination underscores the importance of a detailed assessment to determine the eligibility of credit, ensuring alignment with legal standards and precedents.