2016 (11) TMI 1398 - AT - Central Excise

CENVAT credit - MS Angles, MS Channels, MS Beams etc - Held that - the subject items are used for fabrication of tubes, pipes and fittings, storage tanks, accessories of boiler, accessories of paper machines, cable trays, pulp mill etc. The appellant has also used subject items for fabrication of supporting for equipment & machinery. The appellant has reversed the credit of ₹ 1,75,793/- which was availed by them in respect of MS items used for civil construction and items used outside the factory. In view of the above discussions, we hold that the appellant is eligible to the tune of ₹ 1,69,92,269/- (Rs. 1,71,68,062/- less ₹ 1,75,793/-). The imposition of penalty is also not sustainable and the same is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of CENVAT Credit on MS Angles, MS Channels, MS Beams

Analysis:
1. The appellant, engaged in manufacturing paper and paper boards, availed CENVAT Credit on various items categorized as capital goods, including HR plates, MS plates, beams, MS Channels, and MS angles. A Show Cause Notice was issued proposing to deny the credit, leading to the disallowance of credit amounting to ?1,71,68,062 along with a penalty of ?1,70,00,000.

2. The appellant contended that the subject items were used for fabrication of components/spares/accessories of capital goods within the factory. The appellant produced a Chartered Engineer certificate to support this claim. The appellant had already reversed the credit of ?1,75,793 availed on items not related to factory use. The appellant cited precedents like the M/s India Cements case and the case of Rajasthan Spinning & Weaving Mills Ltd. to support their argument.

3. The department reiterated its findings that the subject items were used in civil constructions, not for fabrication of capital goods. However, upon review, it was found that the subject items were indeed used for fabrication of various components like tubes, pipes, storage tanks, accessories of boilers, and more, as supported by the Chartered Engineer certificate. The Tribunal had previously allowed credit on similar items used for fabrication purposes.

4. Considering the evidence presented, including the Chartered Engineer certificate and the nature of usage of the subject items, the Tribunal held that the appellant was eligible for CENVAT Credit amounting to ?1,69,92,269. The penalty imposed was deemed unsustainable and set aside. The appeal was allowed on the terms of granting credit and nullifying the penalty. A miscellaneous application for Early Hearing by the department was also disposed of accordingly.