2021 (12) TMI 75 - HC - Central Excise

CENVAT Credit - inputs or not - items used for fabrication items of supporting structures of the capital goods - supporting structures fabricated and embodied to the earth - constitute as Goods under the statute or not - Rule 2 of the CENVAT Credit Rules 2004 - HELD THAT - The Respondent Company had obtained a Central Excise Registration under Section 6 of the Central Excise Act 1944 (CE Act) for the purposes of manufacturing of sponge iron and its derivative products. For manufacturing the Respondent constructed/installed 4 100TPD Sponge Iron Plant and availed CENVAT Credit on input on various items during the relevant period i.e. from May to August 2004. A part of the inputs included construction materials. The Court finds that in the present case the categorical finding on fact concurrently both by the Commissioner and the CESTAT is that the iron steel and items were in fact used in the fabrication of identifiable capital goods which were in turn used for manufacture of excisable goods. Further the circular dated 2nd December 1996 issued by the CBEC fully supports the case of the Respondent. Reference could also be made to the decision in Commissioner of Central Excise Jaipur v. M/s. Rajasthan Spinning Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT where the Supreme court allowed MODVAT credit on steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set. The CESTAT was justified in dismissing the Department s appeal since the credit was claimed in respect of the inputs used for fabrication items supporting structures of capital goods - the CESTAT was right in law by allowing CENVAT Credit on the goods used for fabrication of supporting structure for capital goods - Tribunal was right in law in holding that the fabrication goods used for supporting structures were capital goods for which CENVAT Credit was allowable. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of CENVAT Credit Rules regarding the eligibility of certain items as inputs for capital goods.
2. Application of the user test to determine the classification of goods as inputs for capital goods.
3. Justification of CESTAT's decision in allowing CENVAT Credit on disputed goods used for fabrication of supporting structures for capital goods.

Issue 1: Interpretation of CENVAT Credit Rules
The appeals involved the interpretation of the CENVAT Credit Rules regarding the eligibility of certain items as inputs for capital goods. The Respondent Company had obtained a Central Excise Registration for manufacturing sponge iron and its derivative products. The dispute arose when the Commissioner issued a Demand-cum-Show Cause Notice to the Respondent regarding the recovery of wrongly taken inputs and related penalties. The Adjudicating Authority allowed CENVAT Credit for inputs used in the manufacture of specified capital goods, but disallowed a portion of the credit wrongly availed during a specific period. The Department appealed to the CESTAT challenging the decision.

Issue 2: Application of the User Test
The User Test was applied to determine whether the goods in question should be treated as inputs for the manufacture of capital goods. The Respondent contended that the structural items were used within the factory premises for manufacturing parts/components or capital goods classified under the Central Excise Tariff Act. They argued that without the fabrication items, the relevant capital goods could not be constructed or installed. The Adjudicating Authority agreed with the Respondent, allowing CENVAT Credit for the inputs used in the factory. The Department, however, challenged this decision before the CESTAT, which ultimately dismissed the appeal, citing various legal precedents and supporting the Respondent's position.

Issue 3: Justification of CESTAT's Decision
The primary issue addressed by the High Court was the justification of CESTAT's decision in allowing CENVAT Credit on the disputed goods used for the fabrication of supporting structures for capital goods. The Court examined the facts and legal arguments presented by both parties. The Court referenced legal precedents, including decisions by the Supreme Court and various High Courts, to support its analysis. Ultimately, the Court upheld the CESTAT's decision, answering the questions framed by the Court in favor of the Respondent. The Court found that the CESTAT's decision was consistent with legal principles and precedents, leading to the dismissal of the appeals with no order as to costs.

This detailed analysis of the judgment highlights the key issues, legal interpretations, and the reasoning behind the High Court's decision in the case.