2022 (5) TMI 381 - AT - Central Excise

CENVAT Credit - Capital goods - various steel items like angle, channels, beams, plates, etc for manufacture of goods to be used in the manufacture of final products - period in dispute is from 2012-13 to 2014-15 - HELD THAT - Hon ble Chhattisgarh High Court has set aside the decision of the Tribunal s Larger Bench in the case of M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT . It is further observed that the principle of user test also need to be considered while deciding the entitlement of assessee to avail CENVAT Credit as laid down by the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS LTD. 2010 (7) TMI 12 - SUPREME COURT . Following the said decision, the Hon ble Madras High Court in the case of M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE 2017 (7) TMI 524 - MADRAS HIGH COURT , has held that iron and steel items and cement used for erection of foundation and support structures would also come within the ambit of the definition of input so long as it satisfies the user test . In the facts of the present case, it is not in dispute that various steel items have been used for the purpose of setting up of iron ores concentrates plant for manufacture of final products. Therefore, applying the user test principle, the Appellant is entitled to avail credit on the steel items - the Appellant is entitled to avail credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Disallowance of CENVAT credit on steel items used in manufacturing iron ore concentrates.

Detailed Analysis:

Issue 1: Disallowance of CENVAT Credit
The appeal was filed against the Order-in-Appeal confirming the disallowance of CENVAT credit on steel items used by the Appellant in manufacturing iron ore concentrates. The Central Excise Department conducted an audit and issued a Show Cause Notice proposing the disallowance of credit on the steel items. The Assistant Commissioner confirmed the proposal, which was challenged in the first appeal. The Commissioner (Appeals) upheld the demand based on the Tribunal's Larger Bench decision in Vandana Global Limited vs. CCE, which denied credit on iron and steel items used for structural and foundation purposes. The Commissioner also imposed a penalty and rejected the plea to dispute the limitation period.

Issue 2: Arguments and Submissions
The Appellant's advocate argued extensively, presenting detailed written submissions and supporting the credit entitlement based on the 'user test' principle. He highlighted that the Commissioner ignored the utilization statement and relied solely on the Vandana Global decision, which was deemed not a good law by the Chhattisgarh High Court. The Revenue's Authorized Representative supported the impugned order, claiming the appeal lacked merit.

Issue 3: Judicial Precedents
The Tribunal observed that the Chhattisgarh High Court overturned the Vandana Global decision and emphasized the importance of the 'user test' principle in determining CENVAT credit entitlement. Citing the Supreme Court's ruling in CCE Vs. Rajasthan Spinning & Weaving Mills Limited and the Madras High Court's decision in Thiru Arooran Sugars, it was established that steel items used for erection of foundation and support structures qualify as 'input' if they satisfy the 'user test'.

Issue 4: Decision
Considering the 'user test' principle and judicial precedents, the Tribunal concluded that the Appellant was entitled to avail credit on the steel items used for setting up the iron ore concentrates plant. The appeal was allowed in favor of the Appellant, granting consequential relief.

In conclusion, the Tribunal's judgment overturned the disallowance of CENVAT credit on steel items, emphasizing the importance of the 'user test' principle in determining credit entitlement for items used in manufacturing processes.