2022 (11) TMI 1089 - AT - Central Excise

CENVAT Credit - capital goods or structural items of general use? - S.S. Welding Tube - Steel - Tubes - Alloy Steel Pipe - Prime HR Steel Coil - M.S.Wire - M.S.Slate - S.S. Welded tube - H.R. Steel pipe - Link Outer etc. - appellant is manufacturer of sugar molasses or not - HELD THAT - Although while rejecting the claim, a finding has been recorded by the authorities below that these parts were used for structural purposes but no evidence for arriving at such a finding has been discussed or produced anywhere by the department. The only case made out by the department is that the items in issue are not covered by the definition of capital goods in terms of Rule 2(a) ibid and are generally used for structures providing support to the capital goods which are excluded from the definition of capital goods. Apart from this bald allegation, no cogent evidence has been put forth by the department to show that these parts have been used for structural purpose and therefore in the absence of any evidence to the contrary, the claim made by the appellant cannot be denied. Hon ble High Court of Judicature at Madras in the matter 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 has held that M.S. Rod, sheet, M.S. Channel/Plate/flat etc used for erection/fabrication of structural support for various machines like crusher, kiln, hooper etc. without which such structural machinery could not be erected and would not function, are eligible for Cenvat Credit. Undoubtedly, as demonstrated by learned counsel, the parts in issue herein have been used for smooth and efficient functioning of the machinery which has been used for manufacturing Sugar and Molasses and therefore there is no reason not to allow the credit in issue to the Appellants. The appellants are entitled for Cenvat credit of the items in issue - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is justified in availing Cenvat credit on various items used in manufacturing sugar and molasses?

Analysis:
The appellant challenged an order reducing inadmissible Cenvat credit on certain items. The issue was whether the appellant, manufacturing sugar and molasses, could avail Cenvat credit on items like Steel Tubes, M.S. Wire, SS Welding Tube, etc., used in machinery for the final product. The department contended these items were not inputs for sugar and molasses production. The appellant reversed the credit but faced a show cause notice demanding recovery, interest, and penalty. The Adjudicating Authority confirmed this, leading to an appeal rejection by the Commissioner for non-compliance. Upon appeal, the Tribunal remanded the case for a fresh decision. The Commissioner then reduced the inadmissible credit and penalty.

The appellant argued that the items were essential for machinery used in sugar and molasses production, not for construction or permanent structures. The department claimed the items did not meet the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004. The appellant failed to provide evidence supporting their claim. The Tribunal found that the items were crucial for machinery functioning but were denied based on a lack of evidence from the department. Previous decisions favored the assessee, considering similar items as capital goods eligible for Cenvat credit.

The Tribunal, considering precedents, held in favor of the appellant, allowing the Cenvat credit for the items in question. The items were deemed essential for the machinery used in manufacturing sugar and molasses. The appellant's appeal was allowed, granting them the Cenvat credit for the disputed items.