2009 (11) TMI 728 - AT - Central Excise

Summary

Issues involved: Challenge to order disallowing Cenvat credit and recovery of amount, interpretation of Rule 2(a)(B) and Rule 2(k) of Cenvat Credit Rules, 2004, determination of provider of output service, waiver of interest and penalty, direction for deposit of duty amount.

In this case, the applicants challenged an order disallowing Cenvat credit and ordering recovery of amounts, which was upheld by the Commissioner (Appeals). The dispute centered around the interpretation of Rule 2(a)(B) and Rule 2(k) of the Cenvat Credit Rules, 2004. The applicants argued that they were not providers of output service as they had purchased a vehicle for transportation of inputs, not for providing taxable services. Rule 2(a)(B) defines 'capital goods' as a motor vehicle registered in the name of the provider of output service for specific taxable services. Rule 2(k) defines 'inputs' excluding vehicles used for providing output services. The Tribunal found the applicants' argument lacking merit as the vehicles used for transportation of inputs were not exempt under Rule 2(k). The Tribunal held that no prima facie case was made for a total waiver of the demanded amount but directed the deposit of the duty amount while waiving interest and penalty until the appeal's disposal. The duty amount of Rs. 1,33,101 was to be deposited within eight weeks, and recovery of penalty and interest was stayed pending appeal.

The Tribunal emphasized the importance of complying with the deposit requirement to avail of the waiver of interest and penalty during the appeal process. The case was scheduled for compliance reporting on 8th February, 2010. The judgment provided a detailed analysis of the provisions of Rule 2(a)(B) and Rule 2(k) concerning Cenvat credit eligibility and the definition of inputs and capital goods. The decision clarified the distinction between vehicles used for output services and those used for transportation of inputs, emphasizing the specific criteria outlined in the rules. The judgment balanced the interests of the parties by allowing the deposit of the duty amount while temporarily halting the recovery of penalty and interest, pending the appeal's outcome.