2018 (12) TMI 239 - AT - Central Excise

CENVAT Credit - inputs/capital goods - angles, channels, HR plates, MS rounds, joist, sections, wire rope, wire mesh, etc - Held that - The Hon ble Supreme Court has earlier dealt with the issue in the case C.C.E., Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA wherein the Hon ble Apex Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules. The articles on which the appellant herein has availed the cenvat credit clearly falls within the definition of capital goods as defined under Rule 2(k) of the Cenvat Credit Rules 2004 - also, applying to a over ruled decision while rejecting the Appeal is held to be an act of committing a judicial indiscipline on the part of the Commissioner(Appeals). Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Incorrect availing of cenvat credit on iron and steel items.
2. Rejection of appeal by Commissioner(Appeals).
3. Adjudication on whether certain articles qualify as inputs/capital goods for cenvat credit.

Analysis:
1. The appellant was found to have wrongly availed cenvat credit on iron and steel items, leading to a demand for recovery. The Department alleged that these articles were neither inputs nor capital goods. The initial demand was partially confirmed by the Assistant Commissioner, disallowing a portion of the credit. The appellant, dissatisfied with the decision, filed an appeal before the Commissioner(Appeals) which was subsequently rejected.

2. The appellant argued that the rejection of the appeal was based on a decision that had been overruled by the High Court of Chhattisgarh. They cited various judgments, including one from the High Court of Rajasthan, to support their case. The Department, on the other hand, justified the decision based on a departmental instruction. The Tribunal noted that the main issue to be decided was whether the disputed articles qualified as inputs or capital goods for cenvat credit.

3. The Tribunal, after considering the arguments presented, referred to past judgments and the "User Test Principle" established by the Supreme Court. It was observed that the structural items in question, such as angles, joist, beams, etc., were used in the fabrication of support structures for capital goods. Applying the "User Test Principle," it was concluded that these structural items fell within the definition of capital goods under the Cenvat Credit Rules. The Tribunal criticized the Commissioner(Appeals) for relying on an overruled decision and emphasized the importance of judicial discipline to avoid unnecessary litigation and chaos.

4. Citing various decisions where the "User Test Principle" had been applied, the Tribunal held that the articles for which cenvat credit was availed indeed qualified as capital goods. The Tribunal set aside the previous order and allowed the appeal, emphasizing the need for adjudicators to stay updated on current laws and avoid relying on outdated decisions.