2019 (2) TMI 470 - AT - Central Excise

CENVAT Credit - inputs/capital goods - MS plates, angles, coils and other products - whether the articles as that of angles, channels, HR plates, MS rounds, joist, sections, wire rope, wire mesh, etc. are the inputs/capital goods enabling the assesse/ appellant to avail the cenvat credit? - 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. This principle of User Test Principle as classified by the Hon ble Apex Court has subsequently been used in several decisions, i.e. C.C.E. Vs. India Cements Ltd. 2014 (7) TMI 881 - MADRAS HIGH COURT - Even in the case of Vandana Global s own case as the Commissioner (Appeals) has relied upon the above said decision while rejecting the appellant s case. High Court of Madras in the case C.C.E. Vs. India Cements 2011 (8) TMI 399 - MADRAS HIGH COURT has also reiterated the principle of User Test Principle as detailed by Hon ble Apex Court. Seeing from these decisions it stands clear that 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. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of cenvat credit on iron and steel items as inputs/capital goods
- Rejection of claim by Adjudicating Authority based on a previous decision
- Applicability of "User Test Principle" in determining capital goods
- Commissioner(Appeals) not considering recent overruled decisions
- Setting aside of the order and allowing the appeal

Analysis:

Issue 1: Availment of cenvat credit on iron and steel items as inputs/capital goods
The appellant, engaged in manufacturing scooters and motorcycles, availed cenvat credit on iron and steel items used to make structures supporting various machines. The Department alleged wrongful credit availing, leading to SCNs and subsequent Orders-in-Original confirming the demand. The appellant appealed to the Commissioner (Appeals) and subsequently to the Tribunal, arguing that the fabricated parts of capital goods qualify for cenvat credit. The appellant cited relevant case laws to support their claim.

Issue 2: Rejection of claim based on a previous decision
The Adjudicating Authority rejected the appellant's claim based on a previous decision of a Larger Bench, which was subsequently overruled by the High Court of Chhattisgarh. The appellant contended that the findings of the lower authorities were not sustainable due to not considering the settled position of law. The Tribunal observed that the decision of the High Court of Chhattisgarh held the structures made from iron and steel items to be capital goods, aligning with the User Test Principle.

Issue 3: Applicability of "User Test Principle" in determining capital goods
The Tribunal analyzed the User Test Principle, as established by the Hon'ble Supreme Court, in various cases to determine whether the structural items used by the appellant qualified as capital goods. Applying this principle, the Tribunal found that the fabricated items using structural steel for support structures of capital goods fell within the definition of capital goods under the Cenvat Credit Rules, entitling the appellant to cenvat credit.

Issue 4: Commissioner(Appeals) not considering recent overruled decisions
The Tribunal criticized the Commissioner (Appeals) for not considering recent overruled decisions while passing the impugned decision, stating that relying on an overruled decision was an act of judicial indiscipline. Referring to a decision by the Hon'ble High Court of Karnataka, the Tribunal emphasized the importance of public servants being acquainted with the latest laws to avoid unnecessary litigation and chaos.

Issue 5: Setting aside of the order and allowing the appeal
Based on the analysis of the issues and relevant legal principles, the Tribunal set aside the order, allowing the appellant's appeal. The Tribunal concluded that the articles on which the appellant availed cenvat credit clearly fell within the definition of capital goods, as defined under the Cenvat Credit Rules 2004. The Tribunal highlighted the importance of judicial discipline and adherence to the latest legal precedents in making decisions.

This detailed analysis of the judgment highlights the key issues, legal arguments presented, and the Tribunal's decision in favor of the appellant.