Order date – 13 September 2022

Facts – 

• The Appellant, M/s. Shree Ganesh Metaliks Limited, is engaged in the manufacture of sponge iron falling under Chapter 72 of the Central Excise Tariff Act, 1985.
• Coal washery is set up to wash raw coal for use in the manufacture of sponge iron. The Appellant manufactured specified capital goods such as Hopper, Conveyor, components, accessories of Crushing machine and EOT Cranes, which are specified capital goods in terms of various sub-clauses of Rule 2(a)(A) of the Cenvat Credit Rules, 2004.
• Upon procuring the said inputs the Appellant claimed Cenvat credit of Rs.1,97,090/- during the period from September 2013 to March 2014. ER-1 returns were regularly filed.
• Show Cause Notice dated 01.10.2014 was issued alleging availment of Cenvat credit in contravention of provisions of Rule 2 and Rule 3 of the Cenvat Credit Rules, 2004.
• The appellate authority disallowed Cenvat Credit amounting to Rs.1,97,090/- and Penalty of Rs.1,97,090/- under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was also imposed.
• Aggrieved, the appellant filed an appeal.

Issue – 

• Whether disallowing Cenvat Credit is justifiable?

Order – 

• The Tribunal relied on Gujarat High Court in the case of Mundra Ports & Special Economic Zone Limited, in which it was held that the amendment made in the Credit Rules on 07.07.2009 to restrict the credit on structural items, cannot be considered to be retrospective in nature.
• Also, Hon’ble Madras High Court in the case of Thiru Arooran Sugars vs. CESTAT held that iron and steel items and cement used for erection of foundation and support structures would also come within the ambit of the definition of “input” so long as it satisfies the “user test”.
• Also, it was observed that it is not in dispute that the various steel items have been used for the purpose of setting up of coal washery plant as also certified by the Chartered Engineer and have been duly verified by the lower authorities at the adjudication stage.
• Therefore, applying the “user test” principle, as followed by various High Courts, the assessee is entitled to avail credit on the steel items. 
• Therefore, the appeal was allowed.