2015 (4) TMI 1021 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - Capital goods - whether the appellant would be eligible for cenvat credit in respect of MS angles, channels, bars etc., which had been taken by them during the period from September 2010 to February 2012 - Held that - There is no evidence that the fabrication of the capital goods had been declared by them in the ER-1 returns or by any other specific information in this regard given by the appellant. The steel items, in question, - MS angles, channels, bars etc. are not covered by the definition of capital goods and the same would be eligible for cenvat credit only if there is evidence on record to prove that the same had been used for fabrication of capital goods and only in that case such steel items would be eligible for cenvat credit as inputs. But for this there must be some clear evidence on record which, prima facie, is not there in this case. - this is not a case for total waiver from the requirement of pre-deposit. After considering the overall facts and circumstances of the case and also the plea of financial hardship pleaded by the appellant, we direct the appellant to deposit an amount of ₹ 40 lakh within a period of 8 weeks. On deposit of this amount within the stipulated time period, the requirement of pre-deposit of balance amount of cenvat credit demand, interest and penalty would stand waived and recovery thereof is stayed - Partial stay granted.

Issues:
1. Eligibility of cenvat credit for MS angles, channels, and TMT Bars.
2. Interpretation of Rule 2(a) of the Cenvat Credit Rules, 2004.
3. Evidence required to establish eligibility for cenvat credit.
4. Requirement of pre-deposit in appeals.

Analysis:

Issue 1: Eligibility of cenvat credit for MS angles, channels, and TMT Bars
The appellant, a manufacturer of sponge iron, billets, and TMT Bars, claimed cenvat credit of a specific amount for the mentioned items during the period from September 2010 to February 2012. The Department disputed the eligibility of these items for cenvat credit, asserting that they were not eligible either as inputs or as capital goods. The Commissioner upheld this view, stating that the items were used as supporting structures and not eligible for cenvat credit. The appellant argued that the items were used in the fabrication of capital goods covered under chapter 84 of the tariff, making them eligible for cenvat credit as inputs. The Tribunal found that the appellant failed to provide sufficient evidence to support their claim, as the fabrication of capital goods was not declared in the ER-1 returns, and no specific information was given to the Department. Therefore, the Tribunal held that the appellant did not establish a prima facie case in their favor regarding the eligibility of the mentioned items for cenvat credit.

Issue 2: Interpretation of Rule 2(a) of the Cenvat Credit Rules, 2004
The appellant relied on Rule 2(a) of the Cenvat Credit Rules, 2004, which defines inputs used for the manufacture of capital goods for use within the factory as eligible for cenvat credit. They argued that the steel items in question were used in the fabrication of capital goods falling under chapter 84 of the tariff, making them eligible for cenvat credit. However, the Department contended that the appellant failed to provide concrete evidence, such as drawings and designs of the fabricated capital goods, to support their claim. The Tribunal emphasized the importance of clear evidence to prove the utilization of the steel items for the fabrication of capital goods to qualify for cenvat credit as inputs.

Issue 3: Evidence required to establish eligibility for cenvat credit
The Tribunal highlighted the lack of evidence regarding the declaration of the fabrication of capital goods in the ER-1 returns or through specific information provided to the Department. Without such evidence, the Tribunal found that the appellant's claim regarding the utilization of the steel items for the fabrication of capital goods lacked credibility. The Tribunal stressed the necessity of clear evidence on record to establish the eligibility of items for cenvat credit, especially when the claim is based on the utilization of those items in the manufacture of capital goods.

Issue 4: Requirement of pre-deposit in appeals
Considering the overall facts and circumstances of the case, including the appellant's plea of financial hardship, the Tribunal directed the appellant to deposit a specific amount within a specified period. Upon compliance with this directive, the requirement of pre-deposit for the remaining amount of cenvat credit demand, interest, and penalty was waived, and the recovery thereof was stayed until further notice.

In conclusion, the Tribunal found that the appellant did not provide sufficient evidence to establish the eligibility of MS angles, channels, and bars for cenvat credit. The Tribunal emphasized the importance of clear evidence, such as declaration in returns and specific information to support claims for cenvat credit eligibility.

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