2005 (2) TMI 585 - AT - Central Excise

Summary

Issues:
- Waiver of pre-deposit of Rs. 2,03,94,239 and equal penalty arising from the Commissioner's order denying Cenvat credit for capital goods.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai, addressed the issue of waiver of pre-deposit and penalty concerning the denial of Cenvat credit for capital goods by the Commissioner of Central Excise, Pune. The Tribunal, comprising Ms. Jyoti Balasundaram and Shri Moheb Ali M., considered the arguments presented by Shri M.H. Patil, Advocate for the Appellant, and Shri Bijoy Kumar, SDR for the Respondent.

The Tribunal noted that the applicants had put forth a strong prima facie case for waiver based on the definition of capital goods in Rule 2(b) of the Cenvat Credit Rules, 2002. The definition includes goods used in the factory of the manufacturer of the final product. The Commissioner's order had concluded that the applicants were not entitled to Cenvat credit as M/s. Krupp Industries India Ltd. had manufactured the sugar plant machinery in question. However, the Tribunal highlighted that there was no specific finding by the Commissioner that the machinery was used by Krupp Industries in their factory for manufacturing sugar or molasses.

In light of this discrepancy, the Tribunal found that the applicants had established a prima facie case for waiver. They emphasized that Rule 2(b) did not focus solely on the manufacturer of the machinery but also on the actual use of the machinery in the factory for producing final products. Since the Commissioner's order lacked clarity on this crucial aspect, the Tribunal decided to waive the pre-deposit of duty and penalty, thereby staying the recovery pending the appeal.

This judgment underscores the importance of a clear connection between the use of capital goods in the manufacturing process and the entitlement to Cenvat credit. It highlights the need for a comprehensive assessment of whether the machinery in question was indeed utilized in the factory for producing final goods, as stipulated by the relevant rules. The Tribunal's decision to grant the waiver reflects a cautious approach towards ensuring fairness and proper interpretation of the Cenvat Credit Rules, 2002.