2019 (3) TMI 1144 - AT - Central Excise

CENVAT Credit - capital goods - structural items i.e. Steel Plates, TMT Bars, Angles, Beams etc. - period from January 2008 to June 2009 - Held that - Both the authorities have wrongly relied upon the decision of Vandana Global Ltd. which has now been set aside by the Chattishgarh High Court 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT wherein it has been held that the amendment to Rule 2(k) of CCR, 2004 are only prospective in nature - Further, the period involved in the present case is from January 2008 to June 2009 which is prior to 07.07.2009 and therefore, the amendment carried out on 07.07.2009 is not applicable in the present case. Further, the impugned steel items were used for fabrication of equipment/machinery or supporting structure of the equipment/machinery and are treatable as components/parts of such equipment and machinery and hence credit on the said material is admissible as capital goods. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of CENVAT credit on steel items used in manufacturing Spiral MS Pipes
- Interpretation of Rule 2(k) of CCR, 2004
- Applicability of amendment to past periods
- Consideration of Chartered Engineer certificate at the appeal stage

Analysis:
The appeal was filed against the rejection of CENVAT credit on steel items used in manufacturing Spiral MS Pipes. The Department contended that these items did not qualify as 'capital goods,' leading to a demand for the credit availed. The original authority confirmed the demand, and the Commissioner (A) upheld the decision. The appellant argued that the impugned order did not properly appreciate the facts and law, emphasizing that the steel items were essential for fabricating plant and machinery. The appellant also highlighted that the amendment to Rule 2(k) of CCR, 2004 should not apply retrospectively. However, the authorities relied on the Vandana Global Ltd case, which was later overturned by the Chattisgarh High Court.

Upon review, the Tribunal found that the issue of whether the steel items qualified as capital goods had been settled in favor of the assessee by various decisions. The Tribunal noted that the amendment to Rule 2(k) of CCR, 2004 was prospective and not applicable to the period in question (January 2008 to June 2009). The Tribunal held that the steel items used for fabricating equipment or machinery were treatable as components of such machinery, making the credit admissible as capital goods. This conclusion was supported by relevant case law, including decisions in the UOI v. Associated Cement Co. Ltd. and CCE v. India Cements Ltd. cases.

Ultimately, the Tribunal set aside the impugned order, allowing the appeal of the appellant. The decision was based on the understanding that the steel items in question qualified as capital goods under the relevant provisions, and the authorities had erred in rejecting the CENVAT credit based on an incorrect interpretation of the law. The Tribunal's ruling emphasized the importance of considering the specific usage and role of materials in the manufacturing process when determining their eligibility for credit, in line with established legal principles and precedents.

The judgment, delivered by Mr. S.S. Garg, Judicial Member, highlighted the significance of proper legal interpretation and application of rules in CENVAT credit cases, ensuring that manufacturing entities can avail of legitimate credits for essential inputs and components used in their production processes.