2012 (12) TMI 261 - AT - Central Excise

Denial of cenvat credit on iron and steel structure - Modvat credit on various items which were used for fabricating items like vacuum tank, syrup extraction receiver, stationary flange juice guard etc. alleged that appellant failed to establish that these items were used as parts and accessories of the goods falling under specific heading Credit is not available on goods which are used for erecting the machine or constructing any foundation or supporting structures basically because these items become immovable property - admissibility of the claims are decided having regard to the issue whether the items are used in erecting machinery or are part and accessories of the machinery and the decision in respect of each item as declared by the appellant - held that - all items can be considered to be parts and accessories of Machinery for Sugar Manufacture falling under Heading 8438.30 An observation - I give my findings based on information available on record and taking declaration to be correct. This may lead to some inaccuracies but in the facts and circumstances such inaccuracies are inevitable. Such inaccuracies could have been avoided if the lower authorities were willing to inspect the items and record their findings on use each item which was not done. If I remit this matter for de-novo consideration, going by past experience, the authorities below are most likely to keep writing about case laws without verifying actual use and waste the time of the Tribunal again on this matter involving a small amount. So such a course of action is not warranted.

Issues Involved:
1. Eligibility for Modvat credit on various items used for fabricating structures.
2. Compliance with Rule 57Q of the Central Excise Rules, 1944.
3. Verification of declared use of items by the appellant.
4. Imposition of penalty amount.

Detailed Analysis:

1. Eligibility for Modvat Credit on Various Items Used for Fabricating Structures:

The appellants, manufacturers of sugar, claimed Modvat credit on items used for fabricating structures like vacuum tanks and syrup extraction receivers under Rule 57Q of the Central Excise Rules, 1944. The Revenue contested this, arguing that these items were structural and not covered under the definition of Capital Goods in Rule 57Q. Initially, a Show Cause Notice was issued for the recovery of Rs. 7,41,415/-, which was confirmed for Rs. 7,40,935/- along with interest and penalties. Upon appeal, the Commissioner (Appeals) provided relief on many items, reducing the demand to Rs. 1,79,126.38 and the penalty to Rs. 1000/-.

2. Compliance with Rule 57Q of the Central Excise Rules, 1944:

The Tribunal remanded the case to the adjudicating authority to verify the use of the items. However, the authority reconfirmed the demand of Rs. 1,79,126.38 and imposed a penalty of the same amount, without verifying the use of each item as directed by the Tribunal. The adjudicating authority argued that the items received after 1997 were not covered under Rule 57Q as amended post-March 1997, and the appellant did not provide sufficient documentation to support their claims.

3. Verification of Declared Use of Items by the Appellant:

The appellant contended that the authorities failed to verify the declared use of the items, and thus their declarations should be accepted as correct. The Tribunal noted the unwillingness of the lower authorities to verify the actual use of the items, which were put to use almost 12 years ago, and decided to proceed based on the available record and the appellant's declarations.

4. Imposition of Penalty Amount:

In the first round of litigation, the Commissioner (Appeals) had upheld a penalty of Rs. 1000/-. The Tribunal found that the adjudicating authority should not have increased the penalty to Rs. 1,79,126.38 in the second round, as the department did not appeal against the initial penalty. The Tribunal reduced the penalty back to Rs. 1000/-.

Judgment Summary:

- The Tribunal set aside the impugned order regarding the denial of Cenvat credit on structures and structural materials and remanded the matter back to the adjudicating authority to examine the use of these items.
- Upon remand, the adjudicating authority reconfirmed the demand without verifying the use of each item, leading the Tribunal to accept the appellant's declarations as correct.
- The Tribunal allowed credit on items used as parts and accessories of machines in the factory and materials used in fabricating such items but denied credit on goods used for erecting machines or constructing foundations, as these become immovable property.
- The Tribunal reduced the penalty to Rs. 1000/-, consistent with the first round of litigation.

Final Decision:

The Tribunal directed the adjudicating authority to identify the amounts of credits involved in each of the items stated to be disallowed and arrive at the amount to be disallowed, based on the declarations provided by the appellant. The appeal was allowed by way of remand, and the penalty was reduced to Rs. 1000/-.

← Previous Next →