2019 (3) TMI 1145 - AT - Central Excise

CENVAT Credit - capital goods - various items of iron and steel - Held that - In the present case the period involved is prior to 07.07.2009 and the amendment carried out in Rule 2(k) vide CENVAT (Amendment) Rules, 2009 is applicable prospectively and not retrospectively - 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 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of CENVAT credit on iron and steel items used in fabrication of machinery. Interpretation of Rule 2(k) of CCR, 2004. Applicability of amendments made in 2009. Admissibility of CENVAT credit on steel items used in fabrication of capital goods. User test for determining capital goods.

Analysis:
The appeal challenged the rejection of CENVAT credit on iron and steel items used in the fabrication of machinery under Chapter 84. The appellant contended that the impugned items were essential for fabricating boilers, crystallizers, and tanks, constituting capital goods. The appellant provided a Chartered Engineer's certificate to prove usage, citing precedents like Vandana Global Ltd. and Thiru Arooran Sugars to support admissibility of credit on steel items pre-2009. The appellant argued that materials used in fabricating machinery are components of capital goods, referencing cases like UOI v. Associated Cement Co. Ltd. and Gemini Graphics Pvt. Ltd.

The respondent defended the impugned order, leading to a detailed analysis by the tribunal. The tribunal noted that the period in question was pre-2009, ruling that the 2009 amendment was prospective. It highlighted the Chattishgarh High Court's overturning of Vandana Global Ltd. and the tribunal's favorable decision in the appellant's earlier case. Citing the user test from CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., the tribunal concluded that steel items used in fabricating support structures for capital goods qualify as capital goods. It emphasized that structural items supporting machinery are integral components, falling within the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules.

In light of the above analysis and following the precedents cited, the tribunal deemed the impugned order unsustainable in law. Consequently, the order was set aside, allowing the appeal with any necessary consequential relief. The tribunal's decision was based on the interpretation of Rule 2(k) of CCR, 2004, the applicability of amendments made in 2009, and the admissibility of CENVAT credit on steel items used in fabricating capital goods, applying the user test to determine capital goods.