2010 (9) TMI 1019 - AT - Central Excise

Summary

Issues: Appeal against demand, classification of goods, treatment of bio-gas plant, eligibility for Cenvat credit, imposition of penalty.

Analysis:
1. Demand of Duty: The appeals challenged a demand of Rs. 4,26,832 confirmed with interest and a penalty of Rs. 1.00 lakh in each case. The dispute in Appeal No. E/3764 related to September 2004, while Appeal No. E/3765 related to October to December 2004. The materials procured by the appellants were used in the manufacture and installation of a bio-gas plant, with an additional disputed amount of Rs. 49 for an item called gasket in E/3765.

2. Classification of Goods: The appellant argued that the bio-gas plant should be considered pollution control equipment and, therefore, capital goods. Consequently, the items in question should be treated as parts, components, or spares of capital goods, or as inputs for the bio-gas plant manufacturing process. However, the respondent contended that the goods were structural materials falling under Chapter 72 of the Central Excise Tariff Act, specifically excluded from the definition of capital goods. The respondent cited a Tribunal case to support the argument that credit is not available for structural materials.

3. Treatment of Bio-Gas Plant: The Tribunal found that the appellants failed to provide authoritative literature supporting the claim that the bio-gas plant qualified as pollution control equipment. As the impugned items were used in the fabrication and erection of the bio-gas plant, which did not meet the definition of capital goods, they could not be considered parts, components, spares, or accessories of capital goods. Consequently, the appellants were deemed ineligible for Cenvat credit.

4. Imposition of Penalty: Despite upholding the demand of duty with interest, the Tribunal agreed with the appellant's argument that the issue primarily involved the interpretation of legal provisions. Therefore, the Tribunal ruled that no penalty should be imposed on the appellants for the disputed matter.

5. Conclusion: The appeals were disposed of by confirming the duty demand with interest but setting aside the penalty imposed on the appellants. The judgment highlighted the importance of providing substantial evidence and legal support for claims regarding the classification and treatment of goods under excise laws.