2016 (1) TMI 917 - AT - Central Excise

Eligibility for CENVAT credit - iron and steel items used for fabrication of components / accessories of various machinery like rotary klin rotary cooler conveyor systems raw material preparation plant power plant and pollution control equipment - Held that - As in the case of Rajasthan Spinning Mills (2010 (7) TMI 12 - SUPREME COURT OF INDIA ) held that steel plates and MS channels used in the fabrication of chimney would fall within the ambit of capital goods. In the case of CCE vs. India Cements Ltd. 2014 (7) TMI 881 - MADRAS HIGH COURT held that MS plates angles channels etc. used in the erection of various machineries such as electrostatic precipitator for raw mill project additional fly ash handling system MMD crusher etc. can be considered as eligible for cenvat credit as component of capital goods. The Hon ble High Court held after examining the various case laws in favour of assessee. Applying this principles we find that the allegation in the show cause notice that steel items used by the appellant are neither components nor spares nor accessories is not sustainable. Applying the principle of user test laid down by the Hon ble Supreme Court in Jawahar Mills case (2001 (7) TMI 118 - SUPREME COURT OF INDIA ) the angles beams and channels used in the making and fabrication of these capital goods are found eligible for Cenvat credit.- Decided in favour of assessee.

Summary

Issues involved:
Eligibility of cenvat credit on iron and steel items used in the fabrication of various capital goods.

Detailed Analysis:

1. Background: The appellants, engaged in manufacturing sponge iron, availed cenvat credit on iron and steel items used in the fabrication of capital goods. The Revenue initiated proceedings against them, disallowing the credit on certain items like angles, beams, channels, plates, and pipes used in the fabrication of capital goods.

2. Appellant's Plea: The appellant argued that the steel items used for fabrication of machinery components and accessories are eligible for cenvat credit under Rule 2(a) of Cenvat Credit Rules. They emphasized that these items were used in the fabrication of parts that come into existence before installation, even if they become part of immovable machinery later.

3. Legal Precedents: The appellant cited various case laws, including decisions by the Hon'ble Supreme Court and High Courts, supporting the eligibility of steel structural items for cenvat credit. They provided a detailed chart certifying the usage of these items in specific areas of their manufacturing process.

4. Revenue's Argument: The Revenue contended that if the fabricated items become immovable and are fixed to earth, they lose the classification of goods, making them ineligible for cenvat credit. They reiterated the findings of the impugned order disallowing credit for steel items used in fabricating immovable products.

5. Judicial Analysis: The Tribunal examined the eligibility of steel items used in the fabrication of machinery and accessories, considering previous legal interpretations. The definition of capital goods under Rule 2(a) of Cenvat Credit Rules was analyzed, emphasizing the wide inclusion of various items under this definition.

6. Legal Principles: The Tribunal referred to the user test established by the Hon'ble Supreme Court in previous cases to determine whether steel items used in fabrication qualify as capital goods. It cited specific judgments by different High Courts supporting the eligibility of steel items like MS plates, angles, and channels for cenvat credit.

7. Decision: After thorough analysis and application of legal principles, the Tribunal allowed the appeal, stating that the steel items used in the fabrication of capital goods were eligible for cenvat credit. The Tribunal emphasized the importance of the user test and specific categorization of items under the Central Excise tariff and Cenvat Credit Rules.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the cenvat credit on iron and steel items used in the fabrication of various capital goods, based on legal precedents, interpretations of relevant rules, and the user test established by higher courts.