2013 (5) TMI 183 - AT - Central Excise

Waiver of predeposit - Denial of credit capital goods/inputs, input services - Held that - no effort was taken to construe the meaning of the 2nd explanation to the definition of input and to understand the scope of such arguments. - The adjudicating authority has got to examine whether HR Plates, MS Plates and Pipes etc., which are claimed by the appellant to have been used in the manufacture of capital goods in connection with setting up of their cement plant, would fall in the exclusion part of the 2nd explanation to the definition of input. If these items cannot fall in the exclusion part of the explanation, they might be covered by the definition of input provided, of course, they were used for manufacture of machinery (capital goods). - Matter remanded back for reconsideration. Regarding input services - nexus - appellant claims to have used 15 services, in, or in relation to, the setting up of their cement plant. - the burden is on the appellant to prove that the services were used in or in relation to the setting up of the cement factory. They set up such claim in their reply to the show-cause notice, but the adjudicating authority held that no nexus was established between any of the above services and the manufacture of cement. It appears, this finding was recorded without due regard to the fact that setting up of factory was one of the aspects expressly mentioned in the inclusion part of the definition of input service. - matter remanded back for de novo adjudication.

Summary

Issues:
1. Denial of CENVAT credit on capital goods/inputs.
2. Denial of CENVAT credit on input services.

Analysis:

Issue 1: Denial of CENVAT credit on capital goods/inputs
The appellant sought waiver and stay regarding the adjudged dues, but the tribunal decided to dispose of the appeal without predeposit. The appeal primarily contested the denial of CENVAT credit on capital goods/inputs, including HR Plates, MS Plates, Rails, and MS Pipes. The appellant claimed these items as capital goods but alternatively argued for their classification as inputs. The adjudicating authority neither accepted them as capital goods nor as inputs, leading to the denial of CENVAT credit. The appellant provided evidence and clarifications, including photographs, to support their claim, but the authority's observations were found baseless. The tribunal highlighted the need for a better evaluation of the evidence and directed a re-examination of whether the items fell within the exclusion part of the definition of input.

Issue 2: Denial of CENVAT credit on input services
The appellant was denied over Rs. 3.14 crores of CENVAT credit on 15 input services used in setting up their cement plant. The authority alleged discrepancies in invoices and lacked nexus between the services and the plant setup. The appellant's submissions were not adequately considered, and the authority failed to assess whether the services qualified as input services under the CENVAT Credit Rules. The tribunal emphasized the need to establish the nexus between the services and the plant setup, especially since the period in question predated the exclusion of factory setup from the definition of input service. The authority also overlooked the appellant's explanation regarding altered quantities and values in the invoices, indicating a need for a more thorough examination.

In conclusion, the tribunal identified several shortcomings in the impugned order and remanded the case for a fresh adjudication, urging the authority to address all issues comprehensively and provide the appellant with a fair opportunity to present evidence and arguments. The stay application was also disposed of in light of the remand decision.