2008 (2) TMI 155 - AT - Central Excise

Credit on MS plates, MS angles, MS channels, HR non-alloy steel plates and false flooring components used in the fabrication of structural support to machinery falling u/ch 84 of the Schedule to CET held that any accessory such as false flooring components used in providing structural support to any capital goods, would be eligible as capital goods credit as per Rule 2(b)(iii) - by virtue of Explanation 2 ibid, sheets, angles etc. items would qualify as inputs also for the benefit of credit

Summary

Issues: Denial of Cenvat credit for various items used in fabrication; Interpretation of definition of "capital goods" under Cenvat Credit Rules, 2002.

Analysis:
1. The appeal was filed against the denial of Cenvat credit for MS plates, angles, channels, HR non-alloy steel plates, and false flooring components used in fabrication from June 2002 to July 2003. The lower authorities rejected the credit claim based on the definition of "capital goods" under Rule 2 of the Cenvat Credit Rules, 2002.

2. The appellant claimed that the items were components, spares, or accessories of capital goods specified under the rule. The authorities disagreed, citing a previous order where credit for MS plates was denied. The appellant argued that the items were essential for the fabrication of structural support to machinery, falling under Chapter 84 of the Central Excise Tariff Act.

3. The appellant relied on decisions to support the claim that the items were admissible for Cenvat credit. It was argued that the items used in the fabrication of structural support to machinery were components of capital goods and thus eligible for credit. Alternatively, the items were claimed to be 'inputs' under Rule 2(g) with Explanation 2, which includes goods used in manufacturing capital goods.

4. Reference was made to a previous case where items like angles, channels, and sheets used in fabrication and erection of technological structures were recognized as inputs eligible for credit. The machinery receiving structural support fell under Chapter 84, making the components eligible for credit under Rule 2 of the Cenvat Credit Rules.

5. An alternative argument was presented based on Explanation 2 to Rule 2(g), defining 'inputs' to include goods used in manufacturing capital goods further used in the factory. The items in question were used in manufacturing structural support to machinery, which qualified as capital goods under Rule 2(b)(iii), making them eligible for credit.

6. The false flooring components were considered accessories to the underlying cables and were deemed covered by the definition of capital goods under Rule 2(b)(iii). Ultimately, the appeal succeeded, and the denial of credit for the items in question was set aside, allowing the appeal.