2015 (11) TMI 36 - AT - Central Excise

Denial of CENVAT Credit - credit on various items like MS sheets, plates,joist, channel etc. used for the purpose of manufacture / installation of molasses tanks, boiler etc - adjudicating authority denied the cenvat credit on the ground that items are neither capital goods nor inputs - Held that - items are used for fabrication of capital goods, namely, shape and sections, plates, hot strips, PMP Plate, Angles, and Channels, Hot Strip Mill Plate, Joints Skelp etc. - appellant is entitled to take Cenvat credit on these inputs as inputs of capital goods. Same has taken the support of CBEC Circular No. 964/07/2012 CX dated 2.4.2012. In these terms, I hold that appellant is entitled to take Cenvat Credit on the items in question. Consequently, appellant is not required to reverse the cenvat credit. In these terms, I set aside the impugned order - Decided in favour of assessee.

Summary

Issues Involved: Denial of Cenvat credit on steel items used for manufacturing/installation of molasses tanks and boilers.

Analysis:
The appellant, a manufacturer of sugar and molasses, appealed against the denial of Cenvat credit on steel items like MS sheets, plates, joist, etc., used for manufacturing/installation of molasses tanks and boilers. The adjudicating authority refused the credit, stating these items were neither capital goods nor inputs. The appellant argued that these steel items were used in making structural supports for various machinery integral to the manufacturing process of sugar and molasses. They cited precedents like Madras Aluminium Co., Jindal Steel and Power Ltd., and Lloyds Metals & Engg. Ltd. to support their claim. Additionally, they referred to CBEC Circulars clarifying that structural components essential for a boiler system were parts of the boiler and eligible for Cenvat credit.

The respondent, however, relied on the Vandana Global Ltd. case, the Supreme Court decision in Saraswati Sugar Mills case, and the Bharti Airtel Ltd. case to counter the appellant's arguments. The Tribunal noted that the steel items in question were used for fabricating capital goods like cane carriers, juice clarifiers, molasses storage tanks, etc., which are essential components of a sugar factory. The Tribunal distinguished the facts of the Vandana Global Ltd. case, emphasizing that the steel items here were components and accessories of capital goods, unlike in the Vandana case where supporting structurals embedded to earth were not eligible for credit.

Further, the Tribunal pointed out that the facts in the Saraswati Sugar Mills case were different, as the iron and steel items there were used for supporting structurals embedded to earth, unlike in the present case where the steel items were used for fabricating capital goods directly. The Tribunal also dismissed the applicability of the Bharti Airtel Ltd. case, emphasizing that in this instance, the steel items were used for fabricating capital goods, making the circumstances distinct from the Bharti Airtel case.

Additionally, the Tribunal referred to the decision in the case of Basti Sugar Mills Ltd., where it was held that items used for supporting structures of boilers and fabrication of storage tanks and sugar graders, integral parts of capital goods, were eligible for Cenvat credit. The Tribunal concluded that the appellant was entitled to Cenvat credit on the steel items as inputs of capital goods, aligning with the CBEC Circular. Consequently, the impugned order denying credit was set aside, allowing the appeal with consequential relief, if any.