By TIOL News Service

NEW DELHI, SEPT 20, 2016: THE appellant, a manufacturer of Sponge Iron, availed CENVAT credit on structural items such as HR Plates, M.S. Channels, M.S. Beam, TMT Bar, CTD Bar etc. and welding electrodes and used the same in the manufacture of capital goods and also components and accessories of capital goods which were further used in the manufacture of final product. The main raw materials viz. coal, iron ore and dolomite do not have any CE duty levied on them.

Revenue sought to disallow the CENVAT Credit of Rs.2,78,63,693/- taken on the structural items and welding electrodes during the period 2006-2007 to 2010-2011 (upto September, 2010).

Against the denial of credit by the adjudicating authority the appellant is before the CESTAT.

They have argued the case on merits as well as on the ground of time bar and buttressed their arguments with the assistance of case laws.

The AR justified the demand by placing reliance on the decisions in Vandana Global Ltd. - 2010-TIOL-624-CESTAT-DEL-LB, Tower Vision India Pvt. Ltd. - 2016-TIOL-539-CESTAT-DEL-LB, BhartiAirtel Ltd. - 2014-TIOL-1452-HC-MUM-ST, Doaba Steel Rolling Mills - 2011-TIOL-59-SC-CX, Rathi Steel & Power Ltd. - 2015-TIOL-1416-HC-ALL-CX, Tigrania Metal & Steel Industries Pvt. Ltd. - 2015-TIOL-2055-HC-MUM-CX, BalmerLawrie& Co. Ltd. - 2014-TIOL-69-CESTAT-MUM & Sunrise Industrials - 2011-TIOL-346-CESTAT-BANG.

The Bench extracted the definition of the term “input” [rule 2(k) of CCR, 2004] as it existed during the material period and before and after the amending notification 16/2009-CX(NT) dated 07.07.2009 wherein the following was inserted in the definition namely, “but shall not include cement, angles, channels, Centrally Twisted Deform bar(CTD) or Thermo Mechanically Treated bar(TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods”.

The CESTAT inter alia observed -

++ The Larger Bench decision in Vandana Global Ltd.'s case (supra) laid down that even if the iron and articles were used as supporting structurals they would not be eligible for the credit considering the amendment made w.e.f. 07.07.2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. - 2015-TIOL-1288-HC-AHM-ST, wherein it was observed that the amendment made on 07.07.2009 cannot be held to be clarificatory and as such would be applicable only prospectively.

++ The controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur vs Rajasthan Spinning & Weaving Mills Ltd., - 2010-TIOL-51-SC-CX , wherein the Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile CER, 1944. In the said judgment, the Apex Court has referred to the user test evolved by the Apex Court in the case of CCE, Coimbatore vsJawahar Mills Ltd., - 2002-TIOL-87-SC-CX , which is required to be satisfied to find out whether or not particular goods could be said to be capital goods.

++ Accordingly, 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.

++ The credit of duty paid on Welding Electrodes has been held allowable by several decisions of this Tribunal and hence the issue is no more res integra . [ Ambuja Cements Eastern Ltd. - 2010-TIOL-309-HC-CHHATTISGARH-CX & Hindustan Zinc Limited - 2008-TIOL-408-HC-RAJ-CX followed]

In fine, the impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-2451-CESTAT-DEL)