CESTAT Kolkata Allows CENVAT Credit On Steel Used To Manufacture Capital Goods

The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed Maithan Steel & Power Ltd. to claim CENVAT credit on MS angles, channels, joists and plates used to manufacture capital goods for use within its factory.

The tribunal also allowed credit on welding rods and oxygen.

Judicial Member R. Muralidhar observed, “From the above Certificate, it is seen that the goods in question including the welding rods and oxygen have been used within the factory premises for manufacturing of capital goods and machines.”

The dispute concerned credit taken between August 2008 and April 2009. The Revenue denied ₹34.65 lakh on structural materials including MS channels and angles. It also denied ₹1.68 lakh on welding electrodes and oxygen, which it alleged had been used for repair and maintenance.

Maithan Steel relied on a Chartered Engineer's certificate detailing how the materials were used to manufacture capital goods within the factory. The certificate listed machinery including a reheating furnace, rolling mill, coal gasifier, electrical panels, cooling tower and bed, electrical drive arrangement, branding and rib cutting machine, flying shear and pinch roll, oil circulation system and EOT crane.

The Revenue argued that the certificate did not cover the entire disputed amount. Its authorised representative submitted that it covered only ₹24.42 lakh. Maithan Steel responded that another Chartered Engineer's certificate had been issued to provide the necessary evidence.

The tribunal relied on its earlier ruling in Steel Authority of India Ltd. v. Commissioner of CGST & Central Excise, Bolpur. It had held that plates used in the construction of machinery that were capital goods could qualify for CENVAT credit.

The tribunal distinguished such use from steel used for factory sheds, buildings or foundations. It also considered Uniglobal Papers Private Ltd. v. Commissioner of CGST & CX, Haldia Commissionerate, concerning credit on welding electrodes, MS angles and channels.

The tribunal further noted that the Revenue had relied on the CESTAT Larger Bench ruling in Vandana Global Ltd. v. CCE, Raipur. It observed that the ruling was subsequently reversed by the Chhattisgarh High Court.

Finding these principles applicable to Maithan Steel's case, the tribunal set aside the demand on merits.

It also held that the demand was time-barred. The show-cause notice was issued on August 14, 2012, while the credit related to August 2008 to April 2009.

The company had recorded the credit in its records and disclosed it in its monthly excise returns.

The tribunal also noted that several decisions at the time supported such credit. Maithan Steel could therefore have genuinely believed that its claim was valid.

Relying on Commissioner of Central Excise, Raipur v. Rajaram Maize Products, the tribunal held that when the eligibility for CENVAT credit was open to different interpretations, a bona fide belief could not by itself amount to suppression or justify extending the limitation period.

The tribunal set aside the order on both merits and limitations.

It allowed Maithan Steel's appeal and granted consequential relief in accordance with law.

For Appellant: Vikram Khaitan, CA

For Respondent: S.K. Jha, Authorised Representative for the Respondent.