Items Used In Manufacture & Essential For Functioning Of Plant And Machinery Are Eligible For Cenvat Credit: CESTAT

The Hyderabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the items used in relation to manufacture which are essential for functioning of plant and machinery are eligible for cenvat credit. The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) has observed that CENVAT credit on MS structurals used in the fabrication and erection of capital goods within a factory is admissible for the period prior to the 2009 amendment to the CENVAT Credit Rules. The appellant/assessee, M/s Sheetal Shipping & Metal Processors Ltd., is engaged in the manufacture of sponge iron and had availed CENVAT credit on steel items such as MS channels, MS angles, TMT bars, HRC plates, MS plates and electrodes. These materials were used for the erection and fabrication of structures supporting capital goods in its manufacturing plant. During an audit, the department objected to the availment of credit and issued a show cause notice invoking the extended period of limitation. The department alleged that these steel items were used for constructing factory structures such as hopper houses, crushing houses, screening houses, kiln platforms and other facilities, which it claimed were civil structures and therefore not eligible for CENVAT credit. Subsequently, the adjudicating authority confirmed the demand of ₹58,49,116 and denied the credit, prompting the company to approach the Tribunal. The appellant contended that the steel structurals were used in the fabrication and erection of capital goods necessary for manufacturing operations. To substantiate the claim, the company submitted a Chartered Engineer’s certificate confirming that the materials were used in the machinery and plant structures where manufacturing activities take place. The assessee further argued that the amendment introduced through Notification No. 16/2009-CE (NT) dated July 7, 2009—which excluded items like cement, angles and channels used for construction of structures supporting capital goods from the definition of “input”—was prospective in nature and could not be applied retrospectively to deny credit for earlier periods. The department argued that the steel items fall under Chapter 72/73 and cannot be treated as capital goods. It further maintained that the structures built using these materials—such as kiln platforms, control rooms and sheds—constituted immovable civil structures rather than machinery or components of machinery. Relying on the amended provisions of Rule 2(k) of the CENVAT Credit Rules, the department contended that such materials were explicitly excluded from the definition of “input” when used in the construction of buildings or structures supporting capital goods. The Tribunal noted that the dispute pertained to the period from May 2007 to June 2009, which was prior to the amendment dated July 7, 2009. It observed that several High Court decisions had clarified that the amendment excluding structural materials from the definition of input is prospective and cannot be applied to earlier periods. The Bench referred to judicial precedents which held that structural steel used in the fabrication or support of plant and machinery necessary for manufacturing operations qualifies for CENVAT credit. The Tribunal also noted that the steel items in the present case were used for fabricating structures essential for installing and operating capital goods within the manufacturing plant. Based on the settled legal position and judicial precedents, the Tribunal held that the credit availed by the appellant was legally admissible. Consequently, the impugned order denying CENVAT credit was set aside and the appeal was allowed with consequential relief. The Tribunal also observed that since the case was decided on merits in favour of the assessee, it was not necessary to examine the issue of limitation. Case Details Case Title: M/s Sheetal Shipping & Metal Processors Ltd. Versus Commissioner of Central Tax Citation: JURISHOUR-370-CES-2026(HYD) Case No.: Excise Appeal No. 25441 of 2013 Date: 13.03.2026 Counsel For Appellant: Shri B. Venu Gopal, Advocate Counsel For Respondent: Shri M. Anukathir Surya, Authorized Representative Click Here To Read Order Read More: Storage Of Un-Manufactured Tobacco Is Outside Scope Of Taxable Service : CESTAT

Items Used In Manufacture & Essential For Functioning Of Plant And Machinery Are Eligible For Cenvat Credit: CESTAT

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