Commissioner,GST And Central Excise,Rourkela vs. M/S.Sps Steels LTD. And Power LTD.

Held

The Court held that the CESTAT was justified in dismissing the Department's appeal, answering all three framed questions in the affirmative. The Court found that the factual findings by both the Commissioner and the CESTAT were concurrent, establishing that the iron, steel, and other items were used in the fabrication of identifiable capital goods, which in turn were used for manufacturing excisable goods. The Court distinguished the Supreme Court's decision in Saraswati Sugar Mills on facts, noting that in the present case, the structural items were found to be integral to the capital goods. The Court also referred to the circular dated 2nd December, 1996, issued by the CBEC, which supported the respondent's case. Furthermore, the Court found consistency with decisions from the Madras High Court in CCE, Salem v. Madras Aluminium Co. Ltd. and India Cements Ltd., and the Supreme Court's 'use test' in Commissioner of Central Excise, Jaipur v. M/s. Rajasthan Spinning & Weaving Mills Ltd. The Court concluded that CENVAT credit was allowable on the disputed fabrication goods used for supporting structures of capital goods.

Facts

The appeals by the Commissioner, GST & Central Excise, Rourkela and Bhubaneswar, challenge orders of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that allowed CENVAT credit to M/s. SPS Steels Ltd. and Power Ltd. and M/s. O.C.L. India Ltd. In OTAPL No.4 of 2018, the respondent company, engaged in manufacturing sponge iron, availed CENVAT credit on inputs, including construction materials, used for constructing a sponge iron plant between May and August 2004. A show cause notice was issued by the Commissioner, Central Excise & Customs, Bhubaneswar, proposing recovery of credit amounting to Rs.1,20,61,289/-, interest, and penalty. The respondent contended that structural items were used for fabricating capital goods. The Adjudicating Authority allowed CENVAT credit of Rs.1,19,59,307/- for inputs related to capital goods, disallowing Rs.1,01,983/- and imposing a penalty. The CESTAT dismissed the Department's appeal.

Key Issues

1. Whether the Tribunal was justified in dismissing the appeal without considering that the items claimed as inputs were used for fabricating supporting structures of capital goods? (Question of fact and law, turning on the interpretation of 'inputs' and 'capital goods' under the CENVAT Credit Rules, 2002). 2. Whether the Tribunal was right in law in allowing CENVAT credit on goods used for fabricating supporting structures for capital goods, when these structures are embodied to the earth and do not constitute 'Goods' under the statute? (Question of law, concerning the definition of 'Goods' and eligibility for credit). 3. Whether the Tribunal was right in law in holding that fabrication goods used for supporting structures are inputs for capital goods, given that these structures, once dismantled, cannot be termed as excisable goods and do not fall under the definition of 'capital goods' under Rule 2 of the CENVAT Credit Rules, 2004? (Question of law, focusing on the definition of 'capital goods' and 'inputs'). Contentions: Petitioner (Department): Relied on the Supreme Court decision in Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi, arguing that structural inputs are not part of capital goods. Respondent (Assessee): Contended that structural items were used within the factory for manufacturing parts/components or capital goods, qualifying as capital goods under Rule 2 of the CENVAT Credit Rules, 2002, and that without these fabrication items, capital goods could not be constructed or installed. They relied on the 'user test' and decisions from various High Courts and the Supreme Court.