2016 (3) TMI 346 - AT - Central Excise

Eligibility for cenvat credit - conveyor system, thickener and filtration system, electrical equipments - Held that - The Hon ble Supreme Court in case of CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA applied user test to find out whether or not particular goods could be said to be capital goods which would depend on use for which it was put into as such. The classification of item purchased by the appellant by itself will not determine the eligibility of cenvat credit. The use to which these items were put to by the appellant will decide the eligibility. Applying such user test, it is clear that in the present case, the disputed items were forming part and parcel of overall capital goods of various descriptions and use. M.S. Plants, angles, channels, etc. used in the plant for fabrication of structure like ducting for bag filter, venting and exhaust dust collector chutes, coal crusher, conveyor system coal hopper etc. are eligible for cenvat credit. tHUS structural items such as angles, channels, rods, etc. required to make the machines functioning without any vibration or movement eligible for cenvat credit. - Decided in favour of assessee

Summary

Issues:
- Disallowance of Cenvat credit on various items by the Original Authority.
- Appeal against the order of the Commissioner of Central Excise, Udaipur.
- Applicability of the "user test" to determine eligibility for Cenvat credit.

Analysis:
1. The appeal was filed against the order of the Commissioner disallowing Cenvat credit of a specific amount. This was the second round of litigation, with the impugned order being passed in pursuance of a previous order. The appellants were engaged in the manufacture of Lead and Zinc Concentrates and were availing Cenvat credit on inputs and capital goods. The Original Authority disallowed a significant amount of credit and imposed penalties. The appeal challenged these decisions.

2. The appellant's counsel argued that the Original Authority's findings against the verification report were unjustified. Specific references were made to the report indicating the usage of disputed items in manufacturing integral parts of various systems. The counsel contended that the disallowance was contrary to facts and cited relevant case laws supporting the appellant's eligibility for Cenvat credit.

3. The Department's representative reiterated the Original Authority's findings but failed to justify the disallowance adequately. The nature, usage, and eligibility of the disputed items were examined category-wise. It was highlighted that the items in question were essential for the functioning of specific machinery and equipment. The Original Authority's conclusions were deemed unsustainable due to lack of proper justification.

4. Various disputed items, such as drive base frames, technical structures, galvanized steel, cable trays, and angles, were scrutinized for their eligibility for Cenvat credit. The Tribunal emphasized the importance of considering the use of these items in determining their eligibility, rather than solely relying on their classification. Precedents and case laws were cited to support the appellant's claim for Cenvat credit on these items.

5. Applying the "user test," it was established that the disputed items formed an integral part of the overall capital goods used by the appellant. The Tribunal referred to previous judgments where similar items were deemed eligible for Cenvat credit. After a thorough examination of the facts and discussions presented, the Tribunal concluded that the impugned order was not sustainable and allowed the appeal.

6. In the final decision, the Tribunal ruled in favor of the appellant, overturning the Original Authority's disallowance of Cenvat credit on various items. The detailed analysis highlighted the importance of considering the usage and integral role of disputed items in machinery and equipment to determine their eligibility for Cenvat credit.