2019 (2) TMI 850 - AT - Central Excise

CENVAT Credit - capital goods - structural steel items as that of Ms angle, Ms channels, Ms joists, chequered plate, etc. - denial of credit for want of proof to have been used in or in relation to the manufacture of capital goods or components, spares and accessories of the capital goods - Held that - If such structures satisfies the user test principle as appreciated by Hon ble Apex Court in Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA case, all these structural items are as good as spare parts of the capital goods as mentioned in Clause 3 of Section 2(a) of Cenvat Credit Rules, 2004 and thus are eligible inputs/ capital goods for availing credit. The final product in the present case is the sponge iron for which the kiln, burning chamber, conveyor gallery, fabrication of walkways of platform, staircases, shed, etc. are the essential machineries. As per appellant, none of these machinery can put to use unless and until the impugned structure is there to support the said machinery as the machinery cannot be held suspended in the air. Thus, these structures are not merely the structural support to these machines but very much become the integral part of these machines manufacturing the final product. Once, the documents in the form of certificates and even in the form of designs and layout were already produced on record at the first stage of litigation it was highly unreasonable on part of the Commissioner(Appeals) to reject the Appeal merely on the ground of lack of the primary evidence as that of Chartered Engineer s Certificate, designs and layout etc. The impugned steel articles, the way they have been used to for the kiln, after burning chamber, conveyor gallery, fabrication of walkways of platform, staircases, shed, etc., the machines for manufacturing final products they are as good as the component/ spare/ accessories to such machines and as such are the available inputs for the cenvat credit as has been availed by the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of cenvat credit for structural steel items used in manufacturing capital goods or components.

Analysis:
The appellant, engaged in sponge iron manufacturing, availed cenvat credit on structural steel items used for supporting structures in the factory premises. The Department alleged wrongly availed credit and issued a show cause notice proposing recovery. Despite initial rejection of the proposal, subsequent appeals led to the current appeal before the Tribunal.

The appellant argued that the disputed structural items are essential for the machinery to function, citing the "user test" principle from relevant case laws. They emphasized that the structures are integral to the machinery manufacturing the final product, sponge iron. The Department, however, contended that the appellant failed to provide evidence supporting their claim, such as a Chartered Engineer's Certificate or relevant documents.

After considering the arguments and previous orders, the Tribunal noted that the structural items, if essential for the machinery's operation and satisfy the "user test" principle, qualify as inputs for availing cenvat credit. The Tribunal criticized the Commissioner(Appeals) for ignoring evidence produced earlier, including certificates and reports confirming the necessity of the disputed items for the plant's functioning. The Tribunal referenced a High Court decision supporting the appellant's position and held that the Commissioner(Appeals) erred in dismissing the appeal due to lack of primary evidence.

In conclusion, the Tribunal set aside the Commissioner(Appeals) order, allowing the appeal and emphasizing the importance of considering evidence and relevant legal principles in such cases. The judgment highlighted the significance of the disputed structural items in the manufacturing process and their eligibility for cenvat credit based on established legal precedents.