The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), set aside the disallowance of Cenvat Credit and observed that iron, steel, cement, welding electrodes used in the manufacture of storage tanks and pollution control systems are capital goods.
The Appellant, M/s. Uniglobal Papers Private Limited is engaged in the manufacture of Kraft Paper and Duplex Paper. A communication asking for the details of CENVAT Credit availed by them i.e cement, welding electrode, MS plate, MS angle and channel for the period 2007-08 and 2008-09 was sent to the Appellant.
The assessee submitted the details of the CENVAT Credit availed by them on the said items and subsequently, a Show Cause Notice was issued proposing to deny and recover Cenvat Credit amounting to Rs.4 lakhs. The Show Cause Notice also proposed to impose a penalty in terms of Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
The Apex Court in the case of CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd, noted that the goods fabricated, using structural, will have to be considered as parts of the relevant machines. The definition of ‘Capital Goods’ includes components, spares and accessories of such 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 “user test” evolved by the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd, is required to be satisfied to find out whether or not particular goods could be said to be capital goods.
The Tribunal of PK Choudhary, Judicial Member observed that “It is my considered view that the impugned orders cannot be sustained and are therefore set aside.”
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