[2015] 55 taxmann.com 4 (New Delhi – CESTAT) – Commissioner of Central Excise, Chandigarh vs. Parabolic Drugs Ltd.

Facts:
Assessee manufactured capital goods wherein the MS pipes, channels, angles, grinders and bars were used. The Assessee took CENVAT credit on the said items on the premise that certain goods are “capital goods” and certain goods are used as ‘inputs’ for capital goods. Department denied the credit on the ground that these goods are not capital goods and cannot be regarded as inputs as the same were used for construction of the structures and fixtures. The Commissioner (Appeals) decided in favour of the Assessee, aggrieved by which the revenue filed the appeal.

Held:
The Tribunal affirming the Commissioner (Appeals) Order held that it is not disputed that items hereinabove were used by the Assessee in manufacturing of capital goods and hence CENVAT credit cannot be denied. Relying upon CCE vs. India Cements Ltd. 2014 (305) ELT 558 (Mad HC), it was also observed that the Commissioner (Appeals) has given a finding regarding actual use of the impugned goods in the factory premises of the appellant in technical structures of machines/machinery which are capital goods, based on details of their description and actual photographs submitted by the Assessee. Thus, Revenue’s appeal was dismissed.

[Note: In Rajasthan Spinning & Weaving Mills Ltd. 2010 (255) ELT 481 (SC), applying the “user test” the Court held that, CENVAT credit of items used for manufacture of product which is used as integral part (i.e. component) of the capital goods are also regarded as capital goods. However in Vandana Global Ltd. 2010 (253) ELT 440 (Tri-LB) it was held that the foundations and supporting structures can neither be considered as capital goods nor as part or accessory to capital goods. Hence, the items used in fabrication of such supporting structures cannot be regarded as inputs used for manufacture of capital goods. Further relying upon Maruti Suzuki Ltd. 2009 (240) ELT 641 (SC), the Tribunal held that, in the absence of nexus such items cannot be regarded as inputs for final product. However subsequently, the Madras High Court in the case of India Cements Ltd. 2012 (285) ELT 341 held that CENVAT credit is available. Relying on this judgment, the Tribunal in the case of A.P.P. Mills Ltd. case 2013 (291) ELT 585 (Tri-Bang) disapproved Vandana Global (supra). Recently, the Calcutta High Court in stay matter in the case of Suryla Alloy Industries Ltd. vs. UOI 2014(305) ELT 47 (Cal) taking note of the same has granted waiver of pre-deposit to the Assessee. However, with effect from 07/07/2009, ‘inputs’ does not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated Bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods and with effect from 01/03/2011 any goods used for laying of foundation or making of structures for support of capital goods have been excluded from definition of input].