Relief for Hindustan Zinc Ltd: CESTAT Rules Structural Steel Used for Chimney Support Qualifies as Capital Goods, Eligible for Credit [Read Order]

The Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled in favour of Hindustan Zinc Ltd., holding that structural steel items used for supporting a chimney qualify as capital goods and are eligible for CENVAT credit.

Hindustan Zinc Ltd., the appellant, is engaged in the manufacture of zinc and lead and had installed a captive power plant within its factory premises. The company availed CENVAT credit on various capital goods, inputs, and steel structures used in the erection of the plant and its associated chimney.

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Thirteen show cause notices were issued by the Central Excise department, seeking to deny the credit on multiple grounds. One of them was that steel items like beams, columns, and plates used for supporting the chimney were not covered as capital goods under the CENVAT Credit Rules.

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The appellant’s counsel argued that all goods were received under duty-paid invoices within the excise-registered factory premises, that there was no physical removal of goods outside the factory, and that the CPP and the main unit were functionally and operationally one entity. They also argued that structural steel items were used as integral supports for capital goods like the chimney, and therefore fell within the scope of capital goods eligible for credit.

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The department’s counsel argued that Hindustan Zinc was not the manufacturer of the CPP and that Wartsila, having procured and assembled the plant, should have been the only one eligible for credit. They argued that the separation in accounting and the sale of power at a fixed rate to the main plant created a distinct business activity, justifying the reversal of credit.

The bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that structural steel used for the chimney’s erection was essential for its functioning, so it constituted accessories or components of capital goods. The tribunal held that credit on these items was admissible under Rule 2(a)(A) of the CENVAT Credit Rules.

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The tribunal also held that the matter involved interpretational issues previously decided in favour of the appellant, so, penalty and interest were not justified. The impugned order dated 31 January 2022, passed by the Commissioner, disallowing credit, imposing penalties, and demanding interest, was set aside. All thirteen appeals filed by Hindustan Zinc Ltd. were allowed.

To Read the full text of the Order CLICK HERE

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