2010 (12) TMI 1123 - AT - Central Excise

CENVAT credit - transfer of capital goods to another unit under challan - the appellant were under impression that they could avail the Cenvat credit that the unit at E-54 Road No. 5 was doing the job work for the main unit and therefore it was permissible for the appellant to avail the Cenvat credit u/r 4(5)(a) of the CCR 2004 - Held that - since the unit at E-54 Road No. 5 VKI Area being is unregistered unit not duty paying the same would not have been able to take capital goods Cenvat credit in respect of the capital goods installed there and obviously for this reason only the receipt of the capital goods has been shown in the unit at C-61 VKI Area and Cenvat credit has been availed while the capital goods were actually meant for as installed in the other unit - credit rightly denied - appeal dismissed - decided against appellant.

Summary

Issues:
1. Availment of Cenvat credit on capital goods installed in a different unregistered unit.
2. Correctness of the Commissioner (Appeals) order regarding Cenvat credit demand, interest, and penalties.

Analysis:
1. The appellant, engaged in manufacturing various products chargeable to Central Excise Duty, availed Cenvat credit on capital goods like Transformer, Extruder, and Transformer core winding Machine. However, during a surprise visit by Central Excise officers, it was discovered that these capital goods, for which credit was taken, were not installed in the factory where credit was availed but in another unregistered unit of the appellant. A show cause notice was issued for recovery of wrongly taken credit, interest, and penalties. The Joint Commissioner confirmed the demand and imposed penalties on both the firm and the partner. The Commissioner (Appeals) upheld the demand and penalties, except for the penalty on the partner. The appellant appealed against this order.

2. The appellant contended that the capital goods were sent to the other unit for job work, allowing them to avail the credit under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. They argued that the goods were later returned to the factory, and the disputed amount was reversed. The Departmental Representative argued that the goods were never installed in the factory where credit was taken, and the claim of sending goods to the other unit was an afterthought. Since the other unit was unregistered and not paying excise duty, it could not avail Cenvat credit, making the appellant's actions to avail credit at the registered unit improper. The Tribunal found the appellant's explanation unconvincing, stating that the goods were meant for the unregistered unit, and the credit was rightly denied. The appeal was rejected, upholding the demand and penalties imposed.

In conclusion, the Tribunal upheld the denial of Cenvat credit on capital goods installed in an unregistered unit and the penalties imposed on the appellant. The judgment emphasized that availing credit where goods were not actually used for taxable purposes is impermissible, even if the units belong to the same entity.