2019 (1) TMI 496 - AT - Central Excise

CENVAT Credit - supporting structures/staging of equipments - classification of such equipment - extended period of limitation - Held that - Such classification cannot be questioned at the receivers end, besides the fact that it is beyond the scope of this single bench to scrutinise the same and beyond the scope of the Commissioner (Appeals) to divert from the bounds of the show-cause notice. Staging of equipment/erection of supporting structure - Held that - CENVAT credit availed by the appellant in respect of supporting structure for its equipments was admissible. Appeal allowed - decided in favor of appellant.

Summary

Issues: Inadmissibility of cenvat credit on supporting structures/staging of equipments challenged.

Issue 1: Classification of items for cenvat credit
The appellant, a sugar and molasses manufacturer, challenged the inadmissibility of cenvat credit on items like welding machines, supporting structures, and staging under Chapter 84. The audit revealed an inadmissible credit of &8377; 99,701, leading to a show-cause notice. The first appellate authority confirmed duty demand, interest, and penalty, invoking the extended period. The Commissioner (Appeals) modified the order, allowing credit for welding machines but confirming the demand for structural materials. The appellant argued that the items were classified under Chapter 84 as part of specific equipment, citing relevant case laws. The Tribunal upheld the appellant's contention, setting aside the Commissioner's order on inadmissible credits, interest, and penalty.

Issue 2: Admissibility of cenvat credit on supporting structures
The appellant contended that the supporting structures were essential for the effective functioning of machinery, citing a user test established by the Supreme Court. The Commissioner (Appeals) had erred in classifying the items under Chapter 72/73. The Tribunal, considering various case laws and the necessity of supporting structures for machinery, allowed the cenvat credit on these items. The show-cause notice did not allege suppression of facts for invoking the extended period, further supporting the appellant's case.

Issue 3: Evolution of law on staging of equipment
The Tribunal referred to a previous judgment regarding the classification of staging chequr plates and railing pipes as accessories of capital goods eligible for cenvat credit. The department did not dispute the appellant's use of these items for machinery installation. The Commissioner (Appeals) erred in relying on a case for exemption on steel, which did not apply to the appellant's situation. The Tribunal concluded that the cenvat credit on supporting structures for equipment was admissible, overturning the Commissioner's decision.

In conclusion, the Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order confirming duty demand, interest, and penalty. The judgment emphasized the importance of proper classification of items for cenvat credit eligibility and highlighted the necessity of supporting structures for machinery functioning.