2016 (12) TMI 1122 - AT - Central Excise

CENVAT credit - MS angles, shapes, sections, channels etc - denial of credit on the ground that supporting structures of furnace plant and rolling mill were permanently embedded to earth and hence these were not goods and consequently it cannot be said that these goods were used in the manufacture of capital goods - Held that - The issue of Cenvat credit on structural items used in the fabrication of support structures for capital goods has been decided in favor of the appellants in the case of Monnet Ispat & Energy Ltd. vs. CCE, Raipur 2016 (1) TMI 917 - CESTAT NEW DELHI , where it was held that Applying the principle of user test laid down by the Hon ble Supreme Court in Jawahar Mills case (2001 (7) TMI 118 - SUPREME COURT OF INDIA ) the angles, beams and channels used in the making and fabrication of these capital goods are found eligible for Cenvat credit. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over Cenvat credit availed on MS angles, shapes, sections, channels used for fabrication of supporting structures of furnace plant and rolling mill.
- Interpretation of whether the fabricated items embedded to earth lose the nature of goods and eligibility for Cenvat credit.
- Application of user test to determine if the items fall within the purview of capital goods.
- Comparison of various case laws supporting the eligibility of steel items for Cenvat credit in the fabrication of capital goods.

Analysis:
1. Cenvat Credit Dispute: The appellant, engaged in manufacturing TMT bars, availed Cenvat credit on structural items used for supporting structures. Authorities contended that since these structures were permanently embedded to earth, they were not considered goods used in the manufacture of capital goods, thus denying Cenvat credit. Appellant appealed against this decision.

2. Legal Arguments: The appellant's advocate argued that the steel items were used in fabricating supporting structures for capital goods, citing case laws such as CCE Vs. Rajasthan Spinning Mills Ltd. and others in favor of the assessee. The Revenue, however, supported the authorities' findings.

3. User Test Application: The Tribunal referred to the user test principle established by the Hon'ble Supreme Court to determine if the steel items qualified as capital goods. It cited the case of Monnet Ispat & Energy Ltd. vs. CCE, Raipur, where steel items used in fabrication were considered eligible for Cenvat credit despite becoming part of immovable structures.

4. Judicial Precedents: Various High Courts and Tribunals, including the Hon'ble Madras High Court and Chhattisgarh High Court, upheld the eligibility of steel items like MS plates, angles, and channels for Cenvat credit when used in the fabrication of capital goods. The Tribunal emphasized the importance of considering the purpose and usage of the items in determining their eligibility.

5. Decision: After analyzing the arguments and legal precedents, the Tribunal allowed the appeal, setting aside the previous order and granting consequential relief. The Tribunal found the appellant eligible for Cenvat credit on the steel items used in fabricating supporting structures for capital goods, emphasizing the importance of the user test principle in such cases.

6. Conclusion: The judgment highlights the significance of considering the purpose and usage of items in determining eligibility for Cenvat credit, especially in cases where fabricated structures become part of immovable assets. The decision aligns with previous rulings supporting the eligibility of steel items for Cenvat credit when used in the manufacture of capital goods, providing clarity on the interpretation of relevant legal provisions.