2023 (12) TMI 1000 - AT - Central Excise

CENVAT Credit - inputs - capital goods - structural steel items (plates falling under Chapters 69, 72, 73, 84 and 85) as part of modernization of the plant as well as their existing unit - Ld. Commissioner has denied the credit on the 'plates' mainly on the ground that they fall under Chapter 72 of the Central Excise Tariff, which are excluded from the definition of 'Capital goods' - HELD THAT - In the impugned order credit has been denied on many items which are classifiable under Chapter 84 and 85 also. They fall under the definition of capital goods under Rule 2(a) of the CCR, 2004 and hence they are entitled for the credit as 'Capital goods'. Remaining credit availed on goods falling under Chapters 72, 73 and 74 - HELD THAT - The impugned order has erroneously held that the plates are used in factory shed, construction of building foundation etc. and dismissed the CE certificate furnished by the Appellant. The CE certificate certifies the end use of such plates by the Appellant viz. plates were used as components, parts or accessories of Kiln, Milling Machine, Coke Oven Gas, Pollution Control Equipment, Storage Tank, Kiln, etc. - the adjudicating authority has not given any valid reason for rejecting the CE certificate. Further, in this case the plates were not used as building materials for constructing factory shed, etc. They are used in construction of machinery, which are capital goods. Therefore, the credit on such plates cannot be denied. The impugned order has relied upon Notification No. 16/2009-CE (NT) dated 7.7.2009 which amended explanation 2 to Rule 2(k) of the CCR, 2004 to specifically exclude angles, channels, TMT bards used for construction of factory and laying of foundation or making of structures for support of capital goods - the 'plates' are inputs for the capital goods and hence they are eligible for the credit availed on the 'plates' as 'inputs' - the demand confirmed in the impugned order is not sustainable. Since the demand itself is not sustainable, the question of demanding interest or imposing penalty does not arise. The impugned order set aside - appeal allowed.

Summary

Issues involved: Determination of eligibility of CENVAT Credit on plates under Chapter 72 of the Central Excise Tariff Act, 1985 as inputs or capital goods.

Summary:

Issue 1: Classification of plates under different chapters and eligibility for CENVAT Credit:
The Appellant, engaged in manufacturing iron and steel products, availed CENVAT Credit on plates procured for modernization of the plant. The Ld. Commissioner denied the credit alleging the plates were neither capital goods nor inputs. The Appellant contended that plates under Chapters 69, 84, and 85 qualify as capital goods under Rule 2(a) of the CCR, 2004. The impugned order failed to consider detailed submissions and supplier invoices. The Tribunal agreed with the Appellant, holding that plates under Chapters 84 and 85 qualify as capital goods, setting aside the demand.

Issue 2: End use certification and denial of credit on certain plates:
The Appellant provided a certificate from a Chartered Engineer certifying the end use of plates under Chapters 72 and 73. The impugned order incorrectly dismissed the certificate, stating the plates were used for construction purposes. The Tribunal found the plates were used in machinery manufacturing, qualifying as capital goods, and overturned the denial of credit based on the Chartered Engineer's certification.

Issue 3: Legal precedents and applicability of CENVAT Credit on support structures:
The impugned order relied on a CESTAT decision regarding denial of CENVAT Credit on plates used for support structures. However, a subsequent decision by the Chhattisgarh High Court reversed this, stating goods used in structures embedded to earth should be treated as inputs for capital goods. The Tribunal, following this legal interpretation, held that the plates in question were inputs for capital goods, making them eligible for the availed credit. Consequently, the demand in the impugned order was deemed unsustainable, leading to the setting aside of the order.

Conclusion:
The Tribunal allowed the appeal filed by the Appellant, setting aside the impugned order due to the eligibility of plates for CENVAT Credit as capital goods and inputs, as per the legal interpretations and evidence presented.