2016 (12) TMI 648 - AT - Central Excise

Denial of CENVAT credit - manufacture of sponge iron - cenvat credit on various items namely HSS plate channels joist beams chequered coil/ plates etc. used in the electro static pacificator conveyor Banker chimney and Ash Sylo etc - whether denial of credit on the ground that the same cannot be considered as either input or capital goods for the appellant and taking of cenvat credit is not in conformity with the cenvat statute justified? - Held that - I find that this Tribunal in the case of N.R. Sponge Pvt. Ltd. 2016 (12) TMI 433 - CESTAT NEW DELHI has allowed the cenvat benefit on the goods namely plates angles channels etc. holding the same as inputs/capital goods for availment of cenvat credit. With regard to oxygen gas I find that in terms of the broad definition of input contained in Rule 2(k) of the Cenvat Credit Rules 2004 the said item should fall within its scope and ambit for the purpose of availment of cenvat benefit. Also the cenvat benefit on welding electrodes used in the repair and maintenance of plant and machinery as input are allowed for availment of the cenvat benefit. CENVAT credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Availment of cenvat credit on various items used in manufacturing
- Denial of cenvat credit by the Department
- Admissibility of cenvat credit on disputed goods
- Eligibility of cenvat credit on oxygen gas used for maintenance

Analysis:
The appeal challenged the order by the Commissioner denying cenvat credit to the appellant for items like HSS plate, channels, joist, beams, and oxygen gas used in manufacturing operations. The Department contended that these items did not qualify as inputs or capital goods under the cenvat statute. The appellant argued citing precedents including a Tribunal decision in favor of cenvat credit on similar goods and oxygen gas. The Tribunal's previous rulings emphasized the eligibility of credit on steel items used in fabrication to support machinery within the factory, aligning with the user test for determining capital goods. The Tribunal also referred to the broad definition of inputs under Rule 2(k) of the Cenvat Credit Rules, 2004, supporting the inclusion of oxygen gas for cenvat benefit.

The Tribunal analyzed the precedents, including decisions by the Hon'ble Madras High Court and the Hon'ble Gujarat High Court, to establish the admissibility of cenvat credit on structural steel items. It highlighted the importance of the user test in determining whether goods qualify as capital goods, emphasizing the necessity of support structures for smooth machinery operation. The judgment referenced the Apex Court's ruling on steel plates and MS channels used in fabricating chimneys for generating sets, underscoring the applicability of the user test to ascertain capital goods status for support structures. Ultimately, the Tribunal concluded that the disputed goods, including structural items and oxygen gas, met the criteria for cenvat credit eligibility based on established legal principles and precedents.

In light of the legal position and precedents, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. The decision rested on the interpretation of the cenvat credit rules, user test for capital goods determination, and the broad definition of inputs, ensuring the appellant's entitlement to cenvat credit on the disputed goods. The judgment reinforced the importance of legal clarity and consistency in applying cenvat credit provisions to promote fair treatment and compliance within the excise and customs framework.