2020 (9) TMI 300 - AT - Central Excise

CENVAT Credit - Iron Steel, G.I. Flat, MS Beam, MS channel, Flats, Joist, old and used plates, New MS Plates, PPGI profiles sheets etc. used in erection of EOT crane (during the gestation period) for the new factory - steel structures, nut and bolt, electrical items, 122 KV, Gantry column, 132 KV Isolator, earthing wire, etc. utilised in fabrication of the power house station - rejection of cenvat credit on the ground that these items are falling under chapter heading 72 and 73, and thus not specified under Rule 2A(a) of Cenvat Credit rules. HELD THAT - It is admitted fact that the items have been utilised in the factory of production for erection of new machinery, of EOT crane, utilised in fabrication of the power house station, which are capital goods and are essential for setting up of the factory which manufactures dutiable goods - Although, the appellant has taken credit on these items as capital goods, but actually these are inputs which have been utilised in fabrication of capital goods, including the support structures for erection of machinery. This issue has been settled in favour of the appellant-assessee by the decision of Madras High Court in the case of M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX THE COMMISSIONER OF CENTRAL EXCISE, 2015 (3) TMI 661 - MADRAS HIGH COURT and also by the Hon ble Gujarat High Court in the case of MUNDRA PORTS AND SPECIAL ECONOMIC ZONE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS 2015 (5) TMI 663 - GUJARAT HIGH COURT wherein it has been held that inputs and input service used in the fabrication of capital goods are eligible inputs for the purpose of cenvat credit - The appellant is held entitled for the cenvat credit. Refund claim - case of appellant is that they have debited the cenvat credit under dispute under protest, at the time of investigation and the said fact is also witnessed in the order-in-original, that credit was reversed amounting to ₹ 71,94,972/- - HELD THAT - The respondent Department is directed to refund the amount of cenvat credit under dispute in cash, in terms of Section 142(5) of CGST Act, 2007. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Disallowance of cenvat credit on items used in erection of machinery and fabrication of power house station.

Analysis:
The issue in this case pertains to the disallowance of cenvat credit on various items such as Iron Steel, G.I. Flat, MS Beam, and electrical items used in the erection of an EOT crane and fabrication of a power house station. The appellant, a newly established factory engaged in the manufacture of TMT bars, claimed cenvat credit for these items used during the period of 2014 to 2016. The Court below rejected the credit, citing that the items fell under specific chapters and were not specified under Rule 2A(a) of Cenvat Credit rules.

Upon hearing both sides, the Member (Judicial) found that the items in question were indeed utilized in the factory for setting up new machinery and structures essential for manufacturing dutiable goods. Although the appellant claimed the credit on these items as capital goods, they were actually inputs used in the fabrication of capital goods, including support structures for machinery erection.

The Member (Judicial) referred to precedents set by the Madras High Court and the Gujarat High Court in cases where it was held that inputs and input services utilized in the fabrication of capital goods are eligible for cenvat credit. Citing these decisions, the appeals were allowed, and the impugned order disallowing the cenvat credit was set aside. Consequently, the appellant was held entitled to the cenvat credit.

Furthermore, it was noted that the appellant had debited the cenvat credit under dispute under protest during the investigation, and the amount was reversed. As per Section 142(5) of the CGST Act, 2007, the Department was directed to refund the disputed cenvat credit amount in cash to the appellant. The judgment was dictated and pronounced in open Court by Mr. Anil Choudhary, Member (Judicial).