Structural Components of Boiler and admissibility of CENVAT credit - is such a Circular answer?
A Netizen sent in this piece:
The Central Board of Excise and Customs seems to be on a clarifying mode after the Union Budget. After the Circular no. 960 was issued on 17 th February, 2012, there was a lull and then in the week beginning 26 th March, 2012, Circulars 961, 962, 963 and 964 came to be issued one after the other. Obviously, these Circulars have attempted to clarify issues, which must have been referred to the Board some months ago.
Anyways, coming to the latest Circular dated 02.04.2012, the Board says that it has been issued since the Trade is seeking clarification on the following issue as reproduced below –
“Reference has been received from Trade seeking clarification regarding classification of structural parts/components of Boiler and admissibility of CENVAT credit on these parts/components to the buyers of the Boilers. It has been represented that CENVAT credit is being denied to the supporting structural parts of the Boilers at the buyers' end by classifying the same under Chapter 73 as structural parts and not as a part of Boiler. These are not being covered under the definition of inputs under the CENVAT Credit Rules, 2004, on account of exclusion given in rule 2 (k)(iv)(B)(b). This denial is on the ground that these are used for structures for support of Capital goods, without which the Capital goods can function.”
Frankly speaking, I did not expect the Board to be so puerile to have given a detailed narrative after examining the classification issue when the fact remains that the CENVAT Credit entitlement is being debated and denied at the buyers' end.
It is a settled law that assessment at the supplier's end cannot be challenged at the end of the consignee (client's end). The following decisions can be referred in this regard –
1. MDS Switchgear Ltd. -
2. U.P. State Sugar Corporation Ltd. vs. CCE, Meerut-I -
Probably, the Board is shy to expose the ignorance of its officers at the field level and, therefore, does not address the issue referred in the above manner but exhibits its own naivety.
Anyway, assuming that the Board was right in analysing the classification issue and concluding that structural components are not hit by the exclusion clause in rule 2 (k)(iv)(B)(b) of the CENVAT Credit Rules, 2004, as these are not used for laying of foundation or making of structures for support of capital goods, but are essentially part of Boilers, the moot question that crops up is as to whether this clarification can be applied mutatis mutandis to goods “other than” boilers.