2016 (10) TMI 480 - AT - Central Excise

Cenvat credit - credit was disallowed mainly on the ground that various steel items were used in conjunction with boiler, sinter plant, steel melting shop, coke oven etc. and claim has been made that those steel items are to be considered as parts, accessories and capital goods, which was not accepted by the Revenue - Held that - The eligibility of manufacturer for availing credit on various steel items like in the present case has been a subject matter of decision by the Tribunal and Hon ble High Courts and Hon ble Supreme Court. In the appellant s own case the Hon ble Supreme Court (2015 (4) TMI 569 - SUPREME COURT ) held that railway track and equipments used for handling raw material are eligible for credit. Admittedly, railway tracks are embedded to earth and are not regularly moved from place to place. We find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of Capital Goods includes, components, spares and accessories of such capital goods. Accordingly, applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. - Decided in favour of assessee

Summary

Issues:
Disallowed cenvat credit on steel items used in manufacturing plant.

Analysis:
The case involved a dispute regarding the disallowance of cenvat credit amounting to ?1,76,00,505/- on steel items used in the manufacturing facility of steel billets, as per the Cenvat Credit Rules, 2002/2004. The Revenue contended that the steel items like angles, channels, beams, plates used in the fabrication of technological structures supporting various capital goods did not qualify for credit. The original authority held that these items were not eligible as they were embedded to earth and considered immovable property. However, the Tribunal found the original authority misdirected in analyzing the issue, emphasizing that the steel items were used in connection with capital goods like boilers, sinter plants, melting shops, etc., to make the manufacturing facility operational effectively.

The Tribunal referred to various judicial decisions, including a Supreme Court ruling, to support the eligibility of cenvat credit on steel items used in the fabrication of support structures for capital goods. The User Test, as established by the Supreme Court, was applied to determine whether the structural items qualified as capital goods. It was concluded that the structural items used in the manufacturing facility were integral parts of the relevant machines and fell within the ambit of Capital Goods under Rule 2(a) of the Cenvat Credit Rules. The Tribunal held in favor of the manufacturer, citing precedents from the Tribunal, High Courts, and the Supreme Court, and set aside the impugned order disallowing the cenvat credit.

In a recent decision related to a similar issue, the Tribunal ruled in favor of the manufacturer, emphasizing that the structural steel items used in the fabrication of support structures for capital goods were eligible for cenvat credit. The Tribunal highlighted the applicability of the User Test to determine the eligibility of such items as capital goods, ultimately allowing the cenvat credit. The decision referenced relevant judgments, including the Supreme Court's ruling on a similar issue, to support the manufacturer's claim for cenvat credit on the steel items used in the manufacturing plant.

Overall, the Tribunal's analysis focused on the usage and integration of steel items in the manufacturing process, aligning with established legal principles and precedents from higher courts to determine the eligibility of cenvat credit on the structural steel items. The decision emphasized the functional role of the steel items in supporting capital goods within the manufacturing facility, ultimately leading to the allowance of the cenvat credit and setting aside the Revenue's disallowance order.