The Bangalore Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) allowed Cenvat credit on materials like MS angles and rods used in machinery fabrication before 07.07.2009, but denied credit for the period after the amendment (07.07.2009 to April 2011), as materials for factory structures were excluded from the “input” definition under Rule 2(k) of the Cenvat Credit Rules, 2004.
Sunvik Steels Limited,appellant-assessee, had used cenvat credit on items such as angles, channels, beams, and rods, which were employed by contractors in the fabrication of boilers, cooling towers, and water treatment plants. The authorities argued that these items did not meet the definition of ‘capital goods’ under Rule 2(a) of the Cenvat Credit Rules, 2004.
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A show-cause notice was issued on 23.09.2011 for the recovery of Rs. 1,81,28,042/- along with interest and penalties. After adjudication, the demand was upheld, and penalties were imposed on the company, its Managing Director, and the Central Excise In-charge. The assessee subsequently filed the present appeal.
The assessee’s counsel argued that cenvat credit was wrongly denied on items used in fabricating or supporting capital goods. The denial was based on an earlier decision that was later overturned by the Chhattisgarh High Court. The counsel stated that Rs. 89,135/- had already been reversed for roofing sheets.
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It was further claimed that the items qualified as parts of capital goods, supported by various judgments. Even if credit was not allowed, the appellant should be eligible for an exemption under Notification No. 67/1995-CE(NT).
The counsel also argued that the demand for the period before September 2010 was barred by limitation and that no penalties should apply, as the appellant acted in good faith.
The Authorised Representative (AR) for the Revenue upheld the Commissioner’s findings, arguing that after the 07/07/2009 amendment to Rule 2(k) of the CCR, credit on items like bars, rods, angles, and channels was not permitted, as they were used for building the factory’s supporting structure.
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The Tribunal reviewed the records and heard both parties. The key issue was whether the appellant was entitled to cenvat credit on copper bars, rods, MS rods, sheets, bars, channels, flats, and joists used in the fabrication and erection of plant and machinery within the factory.
The appellate tribunal noted that the issue for the period before 07.07.2009 had already been addressed in prior decisions, including BMM Ispat Ltd. vs. CCE, Belgaum, where it was ruled that cenvat credit was permissible for MS angles, channels, beams, and other items used in the fabrication of machinery and support structures.
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However, for the period from 07.07.2009 to April 2011, the definition of ‘input’ was amended to exclude materials like MS angles, channels, and plates used for constructing factory buildings or foundations. As a result, cenvat credit on these items was not allowed during this period.
The two member bench comprising D.M.Misra (Judicial Member) and R Bhagya Devi (Technical Member) concluded that the appellants were entitled to cenvat credit for the period prior to 07.07.2009, and the demand confirmed for that period was incorrect. For the period after 07.07.2009, the credit was not admissible.
The matter was remanded to the original authority for recalculation of the demand after 07.07.2009, with no penalty imposed, due to the confusion over credit eligibility. The appeal was accordingly disposed of.
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