2014 (7) TMI 103 - AT - Central Excise

CENVAT Credit - whether the MS Plates MS Sheets etc. used for repair and maintenance of the existing plant and machinery or for modification of the existing plant and machinery are eligible for Cenvat credit or not - Held that - While the Commissioner (Appeals) in the impugned Order-in-Appeal has observed that the items in question - MS Plates MS Sheets etc. were used in the factory for construction of supporting structure for machinery and foundation in the show cause notice it has been alleged that the items in question were used by the appellant for repair and maintenance of the existing plant and machinery or for modification of the existing plant and machinery. Thus the allegation that the items in question were used in the foundation of capital goods or for fabricating supporting structures for capital goods was not there in the show cause notice itself and hence the same cannot be raised at the appellant stage. As regards the question as to whether the steel plates used for repair and maintenance for plants and machinery are eligible for Cenvat credit or not there are judgments of two High Courts - Hon ble Rajasthan High Court in the case of UOI v. Hindustan Zinc Ltd. (2006 (5) TMI 44 - HIGH COURT RAJASTHAN ) and Hon ble Karnataka High Court in the case of CCE Bangalore-I v. Alfred Herbert (India) Ltd. (2010 (4) TMI 424 - KARNATAKA HIGH COURT ) - Decided in favour of assessee.

Summary

Issues:
Whether MS Plates, MS Sheets, etc. used for repair, maintenance, or modification of existing plant and machinery are eligible for Cenvat credit.

Analysis:
The dispute in this case revolves around the eligibility of MS Plates, MS Sheets, etc. for Cenvat credit when used for repair, maintenance, or modification of existing plant and machinery. The department issued a show cause notice alleging that these items, used between July 2007 to April 2009, were not eligible for Cenvat credit. The Additional Commissioner's Order-in-Original dropped the demand related to Boiler Tubes and MS Pipes but confirmed the demand for MS Plates and HR Sheets used for repair and maintenance, imposing a penalty under Rule 15(2) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

Upon hearing arguments from both sides, the appellant contended that the items were indeed used for repair and maintenance, citing precedents such as UOI v. Hindustan Zinc Ltd. and CCE, Bangalore-I v. Alfred Herbert (India) Ltd. The appellant argued that these judgments supported their claim for Cenvat credit eligibility. On the other hand, the learned AR opposed the appeal, referencing the findings of the Commissioner (Appeals) and highlighting that the items were mainly used for fabricating structures fixed to earth, making them ineligible for Cenvat credit as per relevant judgments.

The Tribunal noted discrepancies in the allegations made in the show cause notice and the subsequent proceedings. While the Commissioner (Appeals) claimed the items were used for constructing supporting structures for machinery and foundation, the original notice focused on repair, maintenance, and modification of existing plant and machinery. Relying on the judgments of the Hon'ble Rajasthan High Court and the Hon'ble Karnataka High Court, the Tribunal set aside the impugned orders. The Tribunal determined that the steel plates used for repair and maintenance of plants and machinery were indeed eligible for Cenvat credit based on the precedents cited, ultimately allowing the appeal with consequential relief.

In conclusion, the Tribunal's decision clarified the eligibility of MS Plates, MS Sheets, etc. for Cenvat credit when used for repair and maintenance purposes, aligning with established legal precedents and overturning the previous rulings that deemed these items ineligible.