2017 (10) TMI 613 - AT - Central Excise

CENVAT credit - inputs/capital goods - MS angles, channels, joists, beams, etc. - the said items used for manufacture of capital goods, viz., fabrication / manufacture of hot blast stoves - Held that - the issue in the present appeal is covered by the decision in the case of CCE vs. SLR Steels Ltd. 2012 (9) TMI 169 - KARNATAKA HIGH COURT decided by the Hon ble Karnataka High Court, where it was held that Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property. Tribunal for the earlier period has already decided in favor of the assessee by holding that the assessee is entitled to the CENVAT credit on these items which are used for fabrication of hot blast stove. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- CENVAT credit availed on MS angles, channels, joists, beams for fabrication of hot blast stoves
- Applicability of Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004
- Whether items used are eligible for CENVAT credit
- Interpretation of user test
- Admissibility of CENVAT credit on items used for fabrication of immovable property

Analysis:

The appeal challenged the Commissioner (A)'s order rejecting the appellant's appeal regarding the irregular CENVAT credit availed on MS angles, channels, joists, and beams used for manufacturing hot blast stoves. The appellant contended that the items were used for fabrication of hot blast stoves within the factory and were eligible for CENVAT credit under Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004. The appellant argued that the items used for fabrication of capital goods, even if fixed to earth, are eligible for credit. The appellant relied on legal precedents such as Sirpur Paper Mills Ltd. case and decisions of the Karnataka High Court and the Tribunal to support their claim.

The appellant further argued that the impugned order exceeded the show-cause notice's scope and violated binding judicial precedents. They contended that the Department admitted the use of items for fabrication of hot blast stoves in the notice, and therefore, the credit was justified. The appellant emphasized that facts admitted in the notice need not be proven by them, citing the Supreme Court's decision in CCE, Madras Vs. Systems & Components Pvt. Ltd. The appellant also highlighted a previous favorable decision by the Tribunal in a similar case.

On the contrary, the AR defended the impugned order, asserting that the items were used for fabricating support structures for machinery embedded in the earth, making them immovable property ineligible for CENVAT credit. The AR argued that the appellant failed to prove the items' specific use for hot blast stove fabrication, thereby not meeting the user test requirement.

After reviewing the submissions and precedents, the Tribunal found in favor of the appellant. The Tribunal relied on the decision in CCE Vs. SLR Steels Ltd. by the Karnataka High Court and previous Tribunal rulings supporting the appellant's entitlement to CENVAT credit for items used in hot blast stove fabrication. The Tribunal concluded that the impugned order was unsustainable in law and set it aside, allowing the appellant's appeal.

In conclusion, the Tribunal's decision favored the appellant, upholding their entitlement to CENVAT credit on items used for fabricating hot blast stoves, based on legal interpretations and precedents supporting the appellant's position.