2010 (12) TMI 244 - AT - Central Excise

Penalty - appellants had claimed credit in relation to the duty paid on stainless plate, stainless coil etc. stated to have been used in the manufacture of various tanks like feed tank, accept tank, preparation tank, storage tank, besides some other structures and items - whether such tanks fall within the items described under the capital goods - order regarding denial of credit and the imposition of penalty as well as claim for interest stand set aside and authority below has to decide the issue afresh in accordance with provisions of law

Summary

Issues:
Appeal against denial of credit under Cenvat Credit Rules, 2002.

Detailed Analysis:
The appeals in this case arose from a common order passed by the Commissioner (Appeals) Meerut on 30.11.2005, where the appellants challenged the orders by the adjudicating authority that disallowed credit amounting to Rs.5,59,781/- and imposed penalties. The appellants, engaged in manufacturing M.G. Kraft paper, claimed credit under Rule 3 of the Cenvat Credit Rules, 2002, for various items like Welding Electrodes, Stainless Steel Coil, Sheet, Rubber Hose, etc., as capital goods. The lower authorities denied the credit without considering other clauses of Rule 2(b) and failed to analyze whether the appellants were entitled to the benefit under different clauses. The impugned order lacked proper application of mind and failed to address the facts of the case adequately.

The adjudicating authority had allowed credit for fuel oil additive, which was not challenged by the department, making it beyond the jurisdiction of the Commissioner (Appeals) to deny this credit. The Commissioner (Appeals) erred in addressing this issue. The appellants conceded that certain items would not sustain as capital goods based on a decision by the Larger Bench. However, for other items, the authorities were directed to consider the claims in accordance with the law.

Regarding the claim for credit on items like stainless plate and coil used in manufacturing tanks and structures, the authorities were instructed to analyze whether these items fell within the definition of capital goods as per the Rules. Proper examination of the materials on record was deemed necessary before denying the credit. The impugned order and the adjudicating authority's order were set aside to the extent they denied credit on specific items, and the matter was remanded to the adjudicating authority for fresh consideration in line with the legal provisions.

In conclusion, the appeals were successful, and the denial of credit, imposition of penalties, and claims for interest were set aside. The authorities were directed to reexamine the issues in accordance with the law and the observations made in the judgment.