2013 (8) TMI 840 - AT - Central Excise

CENVAT credit on Capital Goods taken on lease from Corporate Ispat Alloys Ltd. (CIAL) - Rule 4(3) of the Cenvat Credit Rules, 2004 - Stay - Held that - Prima facie the availment of capital goods Cenvat credit in the case by the appellant was not correct, as the words financing company in Rule 4(3) of Cenvat Credit Rules cannot be read as any person . Bar of Limitation Held that - Prima facie there was no intimation in this regard to the department - In any case, the point of fact can be examined in detail only at the time of final hearing - while AIL and CIAL had intimated the leasing of their plant and machinery to the appellant and also the payment of amount equal to the Cenvat credit availed by issue of invoices, it was not known as to whether the availment of Cenvat credit by the appellant on the basis of invoices issued by AIL and CIAL was specifically intimated to the department. Appellant directed to to deposit an amount of Rs.6 Crores - stay granted partly.

Summary

Issues:
1. Correctness of capital goods Cenvat credit availed by the appellant.
2. Applicability of Rule 4(3) of the Cenvat Credit Rules, 2004.
3. Time limitation for recovery of allegedly wrongly taken capital goods Cenvat credit.
4. Merger of companies and transfer of Cenvat credit.
5. Eligibility of structural steel items for Cenvat credit.

Analysis:
1. The main issue in this case is the correctness of the capital goods Cenvat credit taken by the appellant concerning the plants of two other companies leased to them. The department objected that the credit was taken from manufacturing companies, not finance companies as required by Rule 4(3) of the Cenvat Credit Rules, 2004. The Commissioner confirmed the demand, invoking the extended period under the Central Excise Act, 1944, alleging suppression of facts. The appellant argued that the credit was permissible, as the leasing companies were related, and the credit was duly informed to the authorities.

2. Rule 4(3) of the Cenvat Credit Rules allows credit for capital goods acquired on lease from a financing company. As the leasing companies were manufacturing, not finance companies, the tribunal held that the credit availed by the appellant was not correct. The tribunal found that the term "financing company" cannot be interpreted broadly, and the credit availed did not meet the rule's criteria.

3. Regarding the time limitation for recovery, the tribunal noted that while the lease was intimated, there was no specific intimation to the department about the credit availed based on the invoices. The tribunal directed the appellant to deposit a substantial amount within a specified period, indicating that total waiver was not appropriate due to the disputed credit and the liability for interest.

4. The issue of merger of companies and transfer of Cenvat credit was raised, highlighting that despite the merger, the credit availed improperly remained a concern. The tribunal emphasized that even after the merger, the appellant would be liable for interest on the wrongly taken credit.

5. Lastly, the eligibility of structural steel items for Cenvat credit was discussed. The tribunal pointed out that there was a dispute regarding the quantity of structural steel items used, which might not be eligible for Cenvat credit. This further complicated the appellant's case, leading to the directive for partial deposit and stay on the recovery of the remaining amount pending appeal.

This detailed analysis covers the key issues raised in the judgment, providing a comprehensive understanding of the tribunal's decision and the legal implications involved.