2020 (5) TMI 521 - AT - Central Excise

CENVAT Credit - capital goods or not - structural items used for supporting the capital goods - HELD THAT - From the definition of capital goods, it is clear that anything which can be called as component spare and accessory of the goods falling under Chapters 82, 84, 85 and 90 of the Excise Tariff Act shall also be called as capital goods - In the present case, it is the submission of the appellant that the MS Structure is neither fabricated nor has been erected post fabrication by the appellant, but it has been purchased from the manufacturer of the boiler, the capital good itself. The said broilers are used in manufacture of appellant's final product. It is emphasized that the boiler manufacturer himself is selling the structure, it being utmost necessary for the said boiler to be put to use. The invoices as emphasized by the appellant (as placed on record) sufficiently supports the contention of the appellant. What stands excluded to be called as input is the structure which is fabricated out of the objects like MS Angles/Sheets/ Joints Fights, etc. The same is not true for the structure in the present case. Mere nomenclature of a part of the boiler as MS Structure is not sufficient to falsify the User Test principle as was laid down by Hon'ble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS LTD. 2010 (7) TMI 12 - SUPREME COURT . The issue involved herein is no more res integra. It rather stands decided in favour of appellant itself in another appeal. The appellant has otherwise proved the MS Structure to not to be fabricated by the appellant but to have been purchased as an integral part of his capital goods i.e. biomass boiler, required by appellant to manufacture its final product i. e. Soap - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
- Availment of Cenvat Credit on structural items not covered under the definition of capital goods
- Denial of Cenvat Credit on MS structure and Nilkamal Trays
- Qualification of MS Structure as input or capital goods

Availment of Cenvat Credit on Structural Items:
The appellant, engaged in manufacturing Toilet Soaps and Soap Noodles, wrongly availed Cenvat Credit on structural items used for supporting capital goods not covered under the definition of capital goods. The department proposed recovery of the availed credit through a show cause notice, which was initially confirmed but later modified in appeal. The issue revolved around the eligibility of the appellant to claim Cenvat Credit on certain structural items.

Denial of Cenvat Credit on MS Structure and Nilkamal Trays:
The department confirmed the denial of Cenvat Credit on MS structure and Nilkamal Trays, stating they did not qualify under the Cenvat Credit Rules. The appellant argued that the MS Structure was essential for the boiler, a capital good, used in manufacturing the final product. The appellant relied on invoices and legal precedents to support their claim, while the department justified the denial based on the show cause notice objections.

Qualification of MS Structure as Input or Capital Goods:
The key issue in the case was whether the MS Structure qualified as an input or capital goods for claiming Cenvat Credit. The appellant contended that the MS Structure, purchased from the boiler manufacturer and integral to the boiler used in manufacturing, should be considered a capital good. Legal arguments centered on the definition of input and capital goods under the Cenvat Credit Rules, with reference to relevant case laws and precedents supporting the appellant's position.

In the detailed analysis, the Member (Judicial) examined the submissions of both parties, emphasizing the importance of the MS Structure in relation to the boiler as a capital good. The analysis delved into the definitions of input and capital goods under the Cenvat Credit Rules, highlighting the appellant's argument that the MS Structure was an essential component for manufacturing the final product. Legal principles such as the 'User Test' principle and precedents from higher courts were cited to support the decision to allow the appellant's claim for Cenvat Credit on the MS Structure.

Ultimately, the Member (Judicial) concluded that the Commissioner Appeals had failed to apply the same principle to all invoices in question, leading to the decision to set aside the order and allow the appeal. The detailed analysis provided a comprehensive overview of the legal arguments, case laws, and factual circumstances surrounding the denial and subsequent allowance of Cenvat Credit on the structural items, particularly the MS Structure, in question.