2011 (1) TMI 262 - AT - Central Excise

Cenvat credit input materials were used as support structures or to enhance the support structure authority did not examined the contention raised by the appellants that they have used the impugned goods for fabricating parts and components of machinery and capital goods - goods have been used for modification of the equipment and in replacing worn out parts of the equipment and have thus become spares and accessories of the machinery - order and remand the matter to the original authority for fresh examination

Summary

Issues:
1. Cenvat credit eligibility for steel items used in manufacturing machinery parts.
2. Application of the decision of the Larger Bench in the case of Vandana Global Ltd.
3. Examination of the use of impugned goods for fabricating parts and components.
4. Consideration of extended period of limitation and penalty provisions.

Analysis:

1. Cenvat Credit Eligibility:
The original authority allowed cenvat credit for steel items like MS Sheets, Angles, Plates, Channels, Flats, Beams, etc., as inputs for capital goods. However, the lower appellate authority set aside this decision based on the Larger Bench's ruling in Vandana Global Ltd. case. The appellant argued that the impugned items were used in manufacturing machinery parts, making them eligible for cenvat credit. The case was remanded to the original authority for detailed examination of each disputed item's use to make a fresh decision.

2. Application of Vandana Global Ltd. Decision:
The department argued that the lower appellate authority correctly applied the Vandana Global Ltd. decision, which disallowed cenvat credit for structural items. The appellant cited the Madras Aluminium Co. Ltd. case to support their claim that credit for structural items should not be denied. The Tribunal noted that the Vandana Global Ltd. decision did not preclude credit for steel items used in fabricating parts and machinery, emphasizing the need for a detailed examination of the actual use of the impugned goods.

3. Examination of Use of Impugned Goods:
Both authorities failed to thoroughly examine how the impugned goods were used. The Tribunal highlighted that the lower appellate authority did not consider the appellant's argument that the goods were used for fabricating machinery parts. The original authority's observations indicated a lack of detailed analysis regarding the specific uses of the impugned items. Therefore, the matter was remanded for a fresh examination in light of the Vandana Global Ltd. decision.

4. Extended Period of Limitation and Penalty Provisions:
The appellant contended that there should be no application of the extended period of limitation or imposition of penalties since the issue was under dispute until the Larger Bench's decision. Citing the Supreme Court's ruling in CCE, Bangalore Vs. Karnataka Agro Chemicals, the appellant argued against invoking penalty provisions in cases of conflicting views. The Tribunal allowed the appeal by way of remand, granting the appellants an opportunity to address the issue of extended time limits and penal liability during the fresh examination.

In conclusion, the Tribunal's decision emphasized the need for a detailed examination of the actual use of steel items in manufacturing machinery parts to determine cenvat credit eligibility, remanding the case to the original authority for a fresh decision in line with the Vandana Global Ltd. ruling.