In the case of Hindalco Industries Ltd, the Ahmedabad bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has held that the credit of steel used to support capital goods is eligible for cenvat credit.
The Appellants, M/s Hindalco Industries Limited, Unit are inter alia engaged in the manufacture of Copper Cathodes falling under Chapter 74 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellants have set up a green field project in Bharuch for the manufacture of multiple products from Copper concentrate. From 2003 to 2005 the Appellants expanded the factory by installing additional machinery such as a smelter, coal handling plant, Sulphuric acid plant etc. Such an expanded portion of the factory was referred to as the Copper III plant. The Appellants placed work orders on contractors for setting up of the Copper III plant. The Appellants inter alia purchased duty-paid H.R. M.S. and S.S. plates for use by the contractor.
The Appellants during the period 2003 to 2005 consumed a total of 16270.59 MT of H.R. M.S. and S.S. plates for setting up of the Copper III plant. Out of the total quantity of H.R. M.S. and S.S. plates purchased, the Appellants availed Cenvat credit of duty paid on 5003.20 MT of H.R. M.S. and S.S. plates under the bonafide belief that the 5003.20 MT of H.R. M.S. and S.S. plates were used in the fabrication of capital goods and thus were used in or about the manufacture of finished goods.
The Appellants availed Cenvat credit of Basic Excise Duty of Rs.2,63,25,623/- and Education Cess of Rs.1,20,973/- on the 5003.20 MT of H.R. M.S. and S.S. plates purchased during 2003 to 2005 in March 2006 after the completion of the Copper III plant. During the scrutiny of the ER-1 return filed by the Appellants for March 2006, it was observed by the Department that the Appellants have availed a total Cenvat credit of Rs.2,64,46,596/- on H.R. M.S. and S.S. plates in March 2006 whereas the dates of the duty paying documents described in the input credit account were of the period 2003 to 2005.
The Appellants were issued with a show cause notice proposing to deny and recover Cenvat credit availed in March 2006 on HR, MS and SS plates received and utilized from 2003 to 2005 for setting up of the Copper III plant. The Commissioner confirmed the denial of credit credit and also imposed equal penalties on the Appellants.
A two-member bench of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that the Cenvat credit has been denied on iron and steel items used in the fabrication of supporting structures for capital goods is eligible. The Appellants have availed Cenvat credit on H.R. M.S. & S.S. plates used in the fabrication of supporting structures of capital goods.
While allowing the appeal the CESTAT set aside the order. Shri Anand Nainawati appeared for the Appellant and Shri Tara Prakash, Deputy Commissioner (Authorized Representative) for the Respondent.
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