2018 (12) TMI 232 - AT - Central Excise

CENVAT Credit - capital goods/inputs - structural items and cement used for fabricating structure/laying foundation to support the capital goods - Held that - The Supreme Court in the case of Commissioner of Central Excise, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA had applied the user test by following the Jawahar Mill s case and held that the steel plates and M.S. Channels falls within the ambit of capital goods. It is not in dispute that the impugned goods were used for fabrication of structurals to support various machines and that without these structurals, the machineries could not be erected and could not function. This fact has further been certified by the Chartered Engineer. Credit allowed - Appeal dismissed - decided against Revenue.

Summary

Issues:
- Availment of cenvat credit on structural items and cement for setting up a new manufacturing facility.
- Dispute regarding denial of cenvat credit by the Adjudicating Authority.
- Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004.
- Interpretation of the definition of inputs under Rule 2(k) of the Cenvat Credit Rules, 2004.
- Application of the user test to determine eligibility of items as capital goods/inputs.

Analysis:

The case involved the appellant setting up a new manufacturing facility for manufacturing Pig Iron and availing cenvat credit on structural items and cement used in the installation and commissioning of the facility. The Adjudicating Authority issued a show cause notice proposing to deny the cenvat credit availed, leading to a dispute. The appellant contended that the items qualified as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004, prior to the amendment introduced in 2009. The appellant argued that the credit on structural items and cement was essential for the smooth functioning of the plant and machinery, relying on legal precedents to support their claim.

The Adjudicating Authority confirmed the demand of cenvat credit along with interest and imposed a penalty under Rule 15(2) of the Cenvat Credit Rules, 2004. The appellant appealed against the order, while the Revenue appealed for non-imposition of penalty under Rule 15(1) of the Rules. The Revenue contended that both penalties under Rule 15(1) and 15(2) should apply. The appellant argued against the invocation of the extended period of limitation, citing relevant legal decisions.

Upon hearing both sides, the Tribunal analyzed the case, focusing on whether the items in question could be considered as capital goods/inputs. The Tribunal referred to the user test applied by the Supreme Court in a similar case and found that the iron and steel items, along with cement, were integral for supporting the machinery in the manufacturing facility. The Tribunal noted that without these items, the machinery could not function, as certified by a Chartered Engineer. Citing the Supreme Court's judgment, the Tribunal concluded that the items used for fabricating structures to support machinery qualified as capital goods/inputs.

In light of the legal principles established in the Supreme Court's decision, the Tribunal set aside the impugned order, allowing the appeal filed by the assessee and dismissing the Revenue's appeal. The cross objection was also disposed of accordingly.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations, and the final decision rendered by the Appellate Tribunal CESTAT KOLKATA.