2016 (12) TMI 530 - AT - Central Excise

Denial of CENVAT credit - M.S. Angle, M.S. Channel and welding electrodes - imposition of penalties - Held that - it appears that subject matter is covered by Hon ble Supreme Court decision in the case of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA wherein it was held that Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S. Channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q. It is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of serial No.5 of the goods described in column (2) of the Table below Rule 57Q - there cannot be any doubt that the M.S. Angle and M.S. Channel are eligible for cenvat credit as they are covered under the definition of either capital goods under Section (2)(a)(A) or input under Section 2(k) of the Cenvat Credit Rules, 2004. In respect of admissibility of cenvat credit for the item namely welding electrodes the Hon ble Chhattisgarh High Court in the case of Ambuja Cement Eastern Ltd. vs. CCE, Raipur 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT and Hon ble Rajasthan High Court in the case of Hindustan Zinc Ltd. vs. Union of India 2008 (7) TMI 55 - HIGH COURT RAJASTHAN allowed the cenvat credit on the welding electrodes. We follow these decisions and hold that the appellant is entitled to cenvat credit on welding electrodes treating the same as input. Appeal allowed - CENVAT credit allowed - decided in favor of appellant-assessee.

Summary

Issues:
Admissibility of cenvat credit on structural steel items and welding electrodes.

Detailed Analysis:
The appellant, M/s Rameshwaram Steel & Power Pvt. Limited, appealed against the Commissioner's order denying cenvat credit on items like M.S. Angle, M.S. Channel, and welding electrodes, along with imposing a penalty. The main issue revolved around the admissibility of cenvat credit on these items used for manufacturing/fabrication of capital goods. The appellant contended that the items fell under Chapter 72 of the Central Excise Tariff Act and were used in the fabrication of Kiln and Power plant falling under Chapter 84. The appellant also highlighted the definition of capital goods and inputs under the Cenvat Credit Rules to support their claim for credit on iron & steel goods and welding electrodes.

The appellant argued that the definition of input included goods used in the manufacture of capital goods, which were further used in the factory of the manufacturer. They emphasized that the period in question was before the amendment that excluded certain iron & steel goods from the ambit of input for construction purposes. The appellant relied on the Explanation-2 clause to assert their entitlement to cenvat credit on the inputs used for fabrication. The appellant's position was supported by the Hon'ble Supreme Court's decision in the case of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd., which emphasized the user test to determine the eligibility of items as capital goods.

After careful consideration, the Tribunal found merit in the appellant's arguments. They applied the user test established by the Supreme Court and concluded that the subject items were eligible for cenvat credit as they fell within the definition of either capital goods or inputs under the Cenvat Credit Rules. Additionally, the Tribunal referenced judgments from the Chhattisgarh High Court and Rajasthan High Court that allowed cenvat credit on welding electrodes, further supporting the appellant's claim. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant, granting them consequential relief.

In conclusion, the Tribunal's decision centered on interpreting the provisions of the Cenvat Credit Rules, analyzing the definitions of capital goods and inputs, and applying the user test to determine the admissibility of cenvat credit on structural steel items and welding electrodes used in the manufacturing process. The judgment aligned with established legal principles and precedents, ultimately ruling in favor of the appellant based on the legal framework and relevant case laws.