2018 (4) TMI 1162 - AT - Central Excise

CENVAT credit - capital goods - steel items such as angles, channels, sheets, plates, etc. for fabrication and erection of various capital goods, like boiler supporting structure, platform, stairs, grating etc. - Held that - the cenvat credit on iron and steel material used in fabrication of supporting structure for capital goods are allowable as has been held by the Tribunal in various decisions - reliance placed in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI , where it was held that applying the User Test to the facts in hand, we have no hesitation in holding 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 - credit allowed. CENVAT credit - fabrication of supporting structure with the bill of material of goods prepared at the time of planning the installation of capital goods - Held that - the assessee has produced the Chartered Engineer s Certificate in which the details of actual usage of the iron and steel structural items in the fabrication of supporting structure of capital goods has been given - credit on the basis of Chartered Engineer s certificate will be allowable to the appellant but not on the basis of tentative bill prepared - credit allowed. Penalty u/s 11AC - Held that - when the entire demand of cenvat credit now stands set aside, there is no justification for imposition of any penalty under section 11 AC - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit on iron and steel items used for fabrication of supporting structures for capital goods.
2. Disallowance of Cenvat credit based on the quantity of material consumed compared to the bill of material.
3. Pending issue of penalty under section 11AC.

Issue 1: Denial of Cenvat credit on iron and steel items used for fabrication of supporting structures for capital goods:

The appellant, engaged in manufacturing various products, purchased steel items for fabrication and erection of capital goods, availing Cenvat credit. The department disputed the credit claiming the structures were not entitled to credit as they supported capital goods. After a remand, the Commissioner confirmed a partial demand of credit. The appellant argued for the allowance of the entire amount, citing precedents that the amendment in Rule 2(k) of Cenvat Credit Rules, 2004 should apply prospectively. The Tribunal noted that the credit on iron and steel for fabrication of supporting structures is allowable, referencing decisions like Singhal Enterprises Pvt. Ltd. vs. CCE. Following the precedent, the Tribunal allowed the credit amounting to ?20 lakh.

Issue 2: Disallowance of Cenvat credit based on the quantity of material consumed compared to the bill of material:

The adjudicating authority denied ?32 lakh of credit, alleging excess consumption beyond the bill of material for capital goods installation. The appellant presented a Chartered Engineer's Certificate detailing actual usage, challenging the denial. The Tribunal held that credit based on the engineer's certificate should be allowed, rejecting the denial based on the tentative bill. Since the credit on iron and steel structures was deemed allowable, the Tribunal set aside the denial of ?32 lakh credit.

Issue 3: Pending issue of penalty under section 11AC:

The Revenue appealed the non-decision on penalty imposition under section 11AC. However, the Tribunal found no justification for penalty imposition as the entire demand for Cenvat credit was set aside. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the decision to drop the Cenvat credit denial.

In conclusion, the Tribunal allowed the appellant's appeal, setting aside the total demand of Cenvat credit and dismissing the Revenue's appeal regarding penalty imposition. The judgment clarified the eligibility of Cenvat credit on iron and steel items used for supporting structures and emphasized the importance of actual usage certification over tentative bills in determining credit allowance.