2016 (12) TMI 833 - AT - Central Excise

Denial of CENVAT credit - manufacture of sugar & molasses - credit on various items namely M.S. Bar, M.S. Plate, Shapes & Sections, H.R. Plates etc. and other items falling under chapter 38, 39 & 76 angles, beams and channel etc - denial on the ground that these items were used by the appellant for repair and maintenance of plant and machinery or for modification of the existing plant of the existing machinery and the items are neither inputs nor capital goods. Held that - We note that the Tribunal has been consistently following the ratio that the steel items when they are used in fabrication of capital goods and their accessories inside the manufacturer premises are eligible for credit by applying user test as evolved by the Hon ble Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA . A reference can be made to latest decision of the Tribunal in Singhal Enterprises Pvt. Ltd. vs. CC&CE, Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI , where applying the User Test , it was held 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. Appeal allowed - credit allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Admissibility of cenvat credit on various items used for repair and maintenance
- Interpretation of the definition of capital goods and input under Cenvat Credit Rules, 2004

Analysis:
The judgment pertains to an appeal filed against an order passed by the Commissioner, Central Excise & Customs, New Delhi, regarding the admissibility of cenvat credit on items used for repair and maintenance. The appellant, engaged in the manufacture of sugar & molasses, claimed cenvat credit on items like M.S. Bar, M.S. Plate, Shapes & Sections, H.R. Plates, etc., used for repair and maintenance of plant and machinery. The department contended that these items did not fall under the definition of capital goods or input as per the Cenvat Credit Rules, 2004, and thus demanded duty. The Tribunal referred to various precedents, including decisions of High Courts and the Supreme Court, to analyze the issue.

The Tribunal highlighted the decision in the case of Lafarge India Pvt. Ltd. vs. CCE, Raipur, where it was observed that steel items used in the fabrication of capital goods inside the manufacturer's premises are eligible for credit. The Tribunal cited precedents such as Jayaswal Neco Limited and Bellary Steel and Alloys Limited to support the admissibility of cenvat credit on structural steel items. It emphasized the application of the user test as established by the Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. to determine the eligibility of items as capital goods.

The Tribunal also discussed the impact of the amendment to Explanation-II of Rule 2(a) defining input w.e.f. 07.07.2009. It referred to the decision in Vandana Global Ltd.'s case, where the Larger Bench held that iron and articles used as supporting structurals were not eligible for credit. However, the Tribunal noted the Gujarat High Court's view that the amendment was not clarificatory and applied prospectively. By referencing the Supreme Court's decision in CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd., the Tribunal concluded that structural items used in the fabrication of support structures for capital goods qualified as capital goods under Rule 2(a) of the Cenvat Credit Rules.

Based on the precedents and legal principles, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal and granting consequential relief to the appellant. The judgment reaffirmed the eligibility of structural steel items used in the fabrication of support structures as capital goods, in line with established legal interpretations and precedents.

In conclusion, the Tribunal's detailed analysis and reliance on legal precedents underscored the importance of applying the user test and interpreting the Cenvat Credit Rules to determine the admissibility of cenvat credit on items used for repair and maintenance in manufacturing processes. The judgment provided clarity on the eligibility of structural steel items as capital goods, aligning with established judicial interpretations and principles.