2022 (9) TMI 797 - AT - Central Excise

CENVAT Credit - capital goods - structural items in the nature of MS sheets, angles etc. - period involved is from 28.1.2008 to 30.7.2008 - HELD THAT - The authorities below have mainly relied upon the decision of the Tribunal in VANDANA GLOBAL LTD. VERSUS CCE 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) wherein the Larger Bench held that the amendment brought forth in the definition of capital goods with effect from 7.7.2009 is retrospectively applicable. The said decision has been set aside by the Hon'ble High Court of Chhattisgarh in M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT . The Commissioner (Appeals) has relied upon the decision of the Hon'ble High Court of Allahabad in UPPER GANGES SUGAR INDUSTRIES LTD. VERSUS COMMR. OF C. EX., MEERUT-II 2013 (8) TMI 501 - ALLAHABAD HIGH COURT which actually analysis the definition of capital goods under the erstwhile MODVAT credit rules. The said definition is not applicable after 2004 and so the reliance placed on the said decision is misplaced. There is no dispute that the MS items were used for fabricating and installing paint plant within the premises of the appellant. The said paint plant is also integral to the manufacturing activity. After appreciating the facts and applying the decision in the case of THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIA CEMENTS LTD. 2014 (7) TMI 881 - MADRAS HIGH COURT , it is held that the credit availed on MS items has to be allowed to the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the credit availed on structural items like MS sheets, angles, etc., is eligible for credit.

Analysis:
The case involved a dispute regarding the eligibility of CENVAT credit on MS sheets, SS sheets, and zinc sheets used for fabricating a new paint plant. The department contended that the credit availed on these items as capital goods was not eligible. The Show Cause Notice proposed to disallow the credit and impose penalties. The original authority and the Commissioner (Appeals) confirmed the demand. The appellant argued that the period involved was before the restriction on availing credit for MS items used in fabrication of structures was introduced. The appellant highlighted the necessity of the paint plant for the manufacturing process of automobile wheel rims, emphasizing the importance of advanced painting technologies for the final product.

The appellant further argued that ownership of goods is not a criterion for availing credit if the goods are used as inputs. The appellant contended that the paint plant was integral to the manufacturing activity, essential for producing final products. The appellant criticized the reliance on past decisions under different rules and highlighted the relevance of the CENVAT Credit Rules, 2004, in the present case. The appellant referenced the decision in India Cements Ltd. case and the Supreme Court's ruling in Rajasthan Spinning & Weaving Mills Ltd. case to support their argument that the credit on MS items used for fabricating the paint plant should be allowed.

The Tribunal analyzed the arguments and precedents cited by both parties. The Tribunal noted the conflicting decisions relied upon by the lower authorities and emphasized the need to apply the relevant law correctly. Referring to the decision in India Cements Ltd. case, the Tribunal concluded that the MS items were crucial for fabricating and installing the paint plant, which was integral to the manufacturing activity. The Tribunal held that the credit availed on MS items should be allowed to the appellant. Consequently, the impugned order disallowing the credit was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal's judgment clarified the eligibility of CENVAT credit on structural items like MS sheets, angles, etc., used for fabricating essential components in the manufacturing process. The decision highlighted the importance of correctly interpreting the relevant rules and precedents to determine the eligibility of credit in such cases.