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2018 (3) TMI 1547 - AT - Central ExciseCENVAT credit - Cement - Whether on Cement and Steel items used for foundation for installation of machinery, which is embedded to earth, the assessee is entitled to avail Cenvat Credit on steel items in terms of Rule 2(k)/2(a) of the Cenvat Credit Rules, 2004, or not? - Held that - no Chapter of the Central Excise Tariff Act, 1985 (CETA) has been prescribed for the components, spares and accessories for consideration as capital goods. Thus, it is evident that irrespective of the classification of components, spares and accessories, when those are fitted to the machines/machineries of the above eligible Chapters, the same should also be considered as capital goods for availment of Cenvat Credit of Central Excise duty paid thereon. It is no doubt a fact that the above machineries without its proper installation, will not be functional to the satisfaction level, in order to achieve the desired objective. Thus, applying the user test the Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA held that even though steel plates and M.S. Channels are used in fabrication of Chimney, would fall within the ambit of capital goods . The eligibility to duty credit of the disputed good cannot be denied. Such eligibility either as capital goods (accessories) or as inputs has been examined and upheld by various decisions - reference allowed - decided in favor of appellant.
Issues involved:
Consideration of Cenvat Credit on Cement and Steel items used for foundation in a power plant installation. Analysis: 1. Issue of Cenvat Credit Eligibility: The case involved the consideration of Cenvat Credit on Cement and Tor Steel Bars used in the fabrication and erection of a supporting structure for a power plant installation. The authorities had denied the Cenvat credit, arguing that the disputed goods did not qualify as 'Capital Goods' or 'inputs' as per the Cenvat Credit Rules, 2004. The dispute centered around whether the goods used for the foundation of machinery embedded in the earth could be considered for Cenvat Credit. 2. Definition of Capital Goods and Inputs: The Tribunal examined the definitions of 'capital goods' and 'inputs' as per the Cenvat Credit Rules, 2004. It was noted that goods falling under specific chapters, components, spares, and accessories of certain goods qualify as capital goods. The definition of inputs included goods used directly or indirectly in the manufacture of final products within the factory of production. The Tribunal emphasized that goods used in the manufacture of capital goods for further use in the factory should also be considered for Cenvat Credit. 3. Application of User Test: Applying the 'user test' as established by the Hon'ble Supreme Court, the Tribunal found that the disputed goods, Cement and Steel Bars, were essential components for the fabrication and erection of the supporting structure for the power plant machinery. The Tribunal cited precedents where similar items were considered 'capital goods' by the Madras High Court, extending the Modvat benefit. The 'user test' was crucial in determining the eligibility of goods as capital goods. 4. Judicial Precedents and Interpretation: The Tribunal referred to judicial precedents where the courts had upheld the eligibility of goods like Cement and Steel used for laying foundations for capital goods as qualifying for Cenvat Credit. The Madras High Court's interpretation emphasized that such goods were integral parts of the capital goods and should be eligible for Cenvat Credit under the relevant rules. 5. Decision and Conclusion: After a detailed analysis of the definitions, precedents, and the application of the 'user test,' the Tribunal concluded that the disputed goods qualified for Cenvat Credit either as 'capital goods' (accessories) or as 'inputs.' The eligibility for duty credit was upheld based on various decisions of higher courts. The Tribunal ruled in favor of the appellant, returning the appeal file to the referral Bench for a decision on merit. In conclusion, the judgment clarified the eligibility of Cement and Steel items used for foundation in a power plant installation for Cenvat Credit, emphasizing the importance of the 'user test' and judicial precedents in determining such eligibility.
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