Cenvat allowed on steel items used in fabrication of capital goods and their accessories inside manufacturing premises

In M/s Jai Balaji Industries Limited v. Commissioner of Central Excise, Customs& Service Tax, Durgapur [Final Order No.75548/2021 dated August 25, 2021], M/s Jai Balaji Industries Limited ("the Appellant") has filed the current appeal being aggrieved against Order-in- Original dated March 10, 2016 ("OIO") passed by the Ld. Commissioner of Central Excise, Customs, Service Tax, Durgapur.

Factually, the Appellant is engaged in the manufacture of iron and steel products of different grades classifiable under Chapters 72 & 73 of the first schedule to the Central Excise Tariff Act, 1985. They had availed Cenvat credit on Angles, Channels, Joists, Beams, TMT Bars, Plate, H.R. Coils, H.R. Sheets, Rounds, Sheets. Billets, Flats, Paints, Rails, Castings, Coils, Electrode/Welding Electrode and Miscellaneous Chemical Products falling under different headings ("Impugned goods").

Three periodical show-cause notices were issued by the department alleging that the impugned goods were not defined as capital goods under Rule 2(a)of the Cenvat Credit Rules, 2004 ("Cenvat Credit Rules"). Accordingly, it was alleged that the credit availed and utilized by the Appellant was irregular.

Accordingly, three separate adjudication orders were passed and the Appellant had challenged all the three Orders-in-Original before this Tribunal. All the three cases were remanded to the Commissioner for fresh adjudication after taking into consideration all evidences on record and after due verification of the claim of the Appellants on the use of the items. The Commissioner vide single OIO held that credit availed and utilized by the Appellant was irregular.

Appellant submits that the Commissioner in the remand proceeding has not followed the directions of the Tribunal as no verification was got conducted by the Commissioner despite having been pointed out to him in the remand proceedings. Moreover the Cenvat credit was disallowed on Electrode/Welding Electrode which were also used in the manufacturing process without which it is not possible to manufacture the finished goods. Further, the Appellant submitted that this Tribunal has already allowed the appeal in respect of their sister units where similar/identical items were involved.

The Hon’ble CESTAT, Kolkata noted that the Appellant had furnished the detail use and account of each of the capital items along with necessary evidences, but the Ld. Commissioner had not appreciated the said evidences and disallowed the Cenvat credit on the disputed items. CESTAT find that this Tribunal directed the Adjudicating Authority to decide the issue afresh, taking into consideration all evidences on record and after due verification of the claim of the Appellants on the use of the items and instead of carrying out the directions of the Tribunal, the Commissioner mainly reproduced the findings of his predecessor, which is a gross violation of the above directions of this Tribunal.

The Hon’ble CESTAT, Kolkata relied upon its own earlier judgment in the case of M/s. Singhal Enterprises Pvt Ltd v. CCE, Raipur wherein it was ruled that eligibility of steel items for cenvat credit has been the subject matter of various decisions by the Hon’ble Supreme Court, various High Courts, and this Tribunal where it has been categorically held that the steel items when they were used in the fabrication of capital goods and their accessories inside the manufacturing premises are eligible for credit.  the definition of Capital Goods includes components, spares, and accessories of such capital goods. Accordingly, CESTAT applied the User Test to the facts in hand and held 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.

CESTAT considering the above judgement set aside the impugned order and the appeal is allowed.