Relief to SAIL: CESTAT rules Goods Used in Fabrication of Structures Embedded to Earth are 'Inputs' for Capital Goods [Read Order]

In a major relief to M/s Steel Authority of India Limited (SAIL), the Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the goods used in fabrication of structures embedded to earth are 'inputs' for capital goods.

The appellant procured various structural steel items (plates falling under Chapters 69, 72, 73, 84 and 85) as part of modernization of the plant as well as their existing unit. These 'plates' were used for fabrication of capital goods or parts, components, accessories thereof, to be used inside the plant premise for manufacturing excisable goods.

The appellant was issued a SCN proposing to deny credit of Rs. 154,11,925/- availed on such plates during the underlying period by alleging that such plates are neither capital goods nor inputs. On adjudication, the Commissioner has confirmed the demand of ineligible Cenvat credit amounting to Rs. 1,54,11,925/-, along with interest and penalty. Aggrieved against the impugned order, the Appellant has filed this appeal.

The appellant submitted that not all 'plates' fall under Chapter 72 and various items on which credit has been denied in the impugned order fall under Chapters 69, 84 and 85 and are directly covered under the definition of ‘capital goods’ under Rule 2(a) of the CCR, 2004. Plates’ classifiable under Chapters 84 and 85 directly fall under sub-clause (i) of clause (A) of the term ‘capital goods’ as defined under Rule 2(a) of the CCR, 2004. Further, ‘plates’ falling under Chapter 69, being refractory material fall under sub-clause (v) of clause (A) of the said Rule 2(a).

The appellant further submitted that the term ‘inputs’ is defined under Rule 2(k) of the CCR, 2004. The said term has a wide coverage and practically includes all goods used in the manufacture of final products. Reliance is placed on the decision of the High Court in the case of Hindustan Zinc v. UoI, 2008 wherein it has been categorically stated that where any particular process is integrally connected without which manufacturing is not viable, then the goods which are used therein will be eligible for availment of credit.

A Two-Member Bench of the Tribunal comprising R. Muralidhar, Member (Judicial) and K. Anpazhakan, Member (Technical) observed that “In this regard, we find that the plates in question were not used for foundation, construction of factory or support structure. Following the decision of the Chattisgarh High Court, we hold that the 'plates' are inputs for the capital goods and hence they are eligible for the credit availed on the 'plates' as 'inputs'. Accordingly, we hold that the demand confirmed in the impugned order is not sustainable. Since the demand itself is not sustainable, the question of demanding interest or imposing penalty does not arise.”

To Read the full text of the Order CLICK HERE

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