2010 (9) TMI 614 - AT - Central Excise

Cenvat credit - Inputs - Goods namely plates/hot strip plates, channel & angle/Plate, shape & section/joist, M.S. bar and H.R. coil - The authorities have arrived at concurrent findings about the utilization of the items in question for the purpose of fabrication of structures in the factory of the appellants. At the same time, it is also equally true that the appellants in response to the show cause notice had taken the specific defence that various items were also used for making pipelines and other equipment like storage tank, in support of the contention that the appellants were entitled to avail cenvat credit in relation to the duty paid on such items - Mere raising of plea in answer to the show cause notice does not by itself mean the proof of correctness of such plea - When the plea relates to certain factual aspect, it is absolutely necessary for the person raising such plea to make the same good by producing sufficient evidence in support of such plea - The appellants did produce the photograph of various items in that regard - Mere production of photographs do not amount to proof in support of such plea - Decided against of assessee. Penalty - Appellants however justified in contending that in view of divergent views expressed by different Benches of the Tribunal there was no justification for imposition of penalty - Certainly, therefore, the intention to evade the payment of the revenue cannot be drawn from the materials on record in the facts and circumstances of the case - Hence, as far as penalty is concerned, the order in that regard is liable to be set aside.

Summary

Issues:
- Disallowance of cenvat credit on certain goods
- Classification of goods as capital goods
- Proof required for claiming cenvat credit
- Interpretation of relevant legal precedents
- Imposition of penalty

Analysis:
1. The appeal concerned the disallowance of cenvat credit on goods by the Deputy Commissioner, Moradabad, which was confirmed by the Commissioner (Appeals) Meerut. The goods in question included plates/hot strip plates, channel & angle/Plate, shape & section/joist, M.S. bar, and H.R. coil. The appellants, engaged in manufacturing industrial spirit, had availed cenvat credit on these goods under Rule 3 of Cenvat Credit Rules 2004, claiming them as capital goods.

2. The appellants argued that the goods were used not only in fabricating various equipment but also in making pipelines and storage tanks. They contended that the authorities should have ascertained the quantity of items used for different purposes before denying the cenvat credit. However, the authorities found that the appellants failed to provide sufficient evidence to support their claim, despite raising a defense in response to the show cause notice.

3. The Advocate for the appellants cited the decision in CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., emphasizing the need to determine the usage of goods for claiming cenvat credit. On the other hand, the DR relied on the decision in Vandana Global Ltd. v. CCE, Raipur, which highlighted that goods like angles, joists, beams, channels, bars, and flats used in fabricating structures may not qualify as capital goods for cenvat credit.

4. The Tribunal noted that while the goods were indeed used in fabricating structures in the factory, the appellants failed to provide concrete evidence supporting their claim that some items were used for making pipelines and storage tanks. Mere production of photographs was deemed insufficient as secondary proof, and the absence of primary evidence led to the rejection of the appellants' claim.

5. Regarding the legal precedents, the Tribunal distinguished between the definitions of capital goods and inputs under the Cenvat Credit Rules. It highlighted that certain goods used for laying foundation and building supporting structures may not qualify as inputs for capital goods or final products, based on the decision in Vandana Global case.

6. Ultimately, the Tribunal upheld the decision to disallow the cenvat credit due to the lack of conclusive evidence supporting the appellants' claim. The imposition of penalty was set aside due to the absence of intent to evade revenue payment. The appeal was dismissed based on the clear findings that the goods were primarily used for fabricating structures in the factory, as supported by the record.