Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Hyderabad bench consisting of P.K.Choudhary, Member (Judicial) and P.V.Subba Rao, Member (Technical) held that steel plates and MS channels used in the fabrication of chimney are capital goods and can avail modvat of credit.
M/s. Berry Alloys Limited (Appellant) is engaged in the manufacture of Silico Manganese. The Appellant has been availing Cenvat Credit and in an audit, a show-cause notice was issued alleging that the Appellant availed credit on various capital goods which were not eligible for credit under the definition of capital goods but the appellant produced a show-cause notice that they are entitled to take credit on the disputed goods; also filed a written submission at the time of the personal hearing before the Adjudicating Authority. The Appellant had filed Chartered Engineer’s Certificate regarding the utilization of various items.The Commissioner of Central Excise passed the impugned order and confirmed the demand as proposed in the show cause Notice and imposed an equal penalty. Aggrieved by the order of the Authority the appellant preferred an appeal before the Tribunal.
The Counsel appearing on behalf of the appellant, R. Murlidhar claimed that the authority has denied the Cenvat credit on the sole ground that the capital equipment in question are embedded to earth and hence become immovable property whereas the Counsel appearing for the respondent (Hanuma Prasad) submitted that the Appellant utilized Cenvat credit on steel items for laying foundation of structures for support of capital goods and therefore the Appellant utilized Cenvat credit irregularly.
The Tribunal applied a “user test” and held that the “steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of “capital goods”. allowing the contentions of the respondents the CESTAT upheld the view of the Tribunal and said that “ the Tribunal was correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods”.
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