Capital Goods are 'Inputs' for Manufacture of Finished Goods: CESTAT holds SAIL Entitled to Cenvat Credit [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, allowed an appeal noting erroneous findings by the Commissioner of CGST & Central Excise. The tribunal held that in the present case, capital goods were ‘inputs’ for manufacture of finished goods and the appellant was entitled for Cenvat Credit.

The facts of the case are that the appellant, Steel Authority of India (SAIL), has a steel plant in Durgapur which manufactures various iron and steel and other byproducts falling under the Central Excise Tariff Act. Inside the plant, the (CEM) Shop carries out manufacturing activity for manufacture of spares and parts required for the plant and machinery installed and used for manufacture of final products.

The Commissioner, Bolpur issued a show cause notice against the manner of use of the said goods on 26.02.1999.

The appellant had availed Central Engineering Maintenance Cenvat credit of the duty paid on the said goods as input materials used in or in relation to manufacture of spares and parts required for the plant and machinery installed, in accordance with the Cenvat Credit Rules.

It is to be noted that the auditors of Central Excise Revenue Audit (CERA) never once objected to the availment of cenvat credit in respect of goods used in CEM shop.

When approached after the Adjudicating Authority's decision, CESTAT remanded the matter while directing the appellant to deposit a sum of INR 25 lakhs but the demand of INR 9,22,32,280/- was confirmed by the Commissioner.

The counsel for the appellant relied on the Chartered Engineer’s Certificate and argued that its validity was wrongfully ignored by the Commissioner on a baseless assumption. Also, it was argued that the goods established the requirement of Rule 2(k) for the capital goods to be “inputs” and thus making the appellant entitled to avail cenvat credit.

The tribunal observed that the appellant had correctly taken the credit on the items used for plants and machineries which were also used in the manufacture of finished goods. The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) allowed the appeal with consequential relief.

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