2013 (9) TMI 460 - AT - Central Excise

Denial of CENVAT Credit on Capital Goods Rule 2(a)(A) of CENVAT Credit Rules, 2004 - stay - CENVAT credit on numerous steel items such as M.S. Pipes, Chains, Plates, Flats, Angles, Channels, Sheets, Rods & Beams, etc - Held that - There was glaring inconsistency in the stand taken by the appellant before the adjudicating authority and before us - In any case, the aforesaid averments made by the appellant in their first reply to the show-cause notice were never retracted - Such averments were crucial in determination of a factual question as to whether the steel items were used in a manner which could qualify those items to be capital goods in terms of clause (iii) given under Rule 2(a)(A) - The submission emphatically made by the appellant was that none of the steel items in question was used to fabricate supporting structures - This argument was diametrically opposed to the contention raised by his client before the adjudicating authority in the first reply to the show-cause notice - Prima facie, this conduct of the party is self-defeating - The appellant had specified the Tariff classification of the steel items - Some of the items were classified under Chapter 84 and some of them under Chapter 85 and others under Chapters 72 & 73 - The plea of bona fide belief was also believable - It was not in dispute that there were conflicting decisions on the MODVATability / CENVATability of the steel items during the earlier part of the period of dispute. Relying upon Vandana Global Ltd. Vs. Commissioner of Central Excise, Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) the appellant in their first reply to the show-cause notice and, consequently, CENVAT credit cannot be claimed by them on the steel items in question under Rule 2(a)(A) - The decision of the apex court in Saraswathi Sugar Mills vs. Commissioner of C. Ex., Delhi-III 2011 (8) TMI 4 - SUPREME COURT OF INDIA was to the effect that a supporting structure for any capital goods cannot be considered as component or part of that capital goods and hence would not qualify to be capital goods in terms of clause (5) of the definition of capital goods under Rule 57Q (1) of the erstwhile Central Excise Rules, 1944 - Clause (iii) of the definition of capital goods under the CENVAT Credit Rules is pari materia to clause (5). Waiver of Pre deposit - The appellant should pre-deposit the entire amount of CENVAT credit denied for the normal period balance of dues i.e interest and penalty waived.

Summary

Issues:
Waiver and stay of adjudged dues including CENVAT credit denial and penalty imposition.

Analysis:
The appellant sought waiver and stay for denied CENVAT credit on steel items used in fabrication of supporting structures. The impugned order was based on three show-cause notices, one invoking the extended period of limitation due to alleged suppression of facts. The appellant argued that steel items qualified as 'capital goods' under Rule 2(a)(A) as they were used in fabricating machinery components. They maintained a bona fide belief based on precedents until a 2010 decision against CENVAT credit on such items. The appellant also highlighted non-claim of credit for steel items in civil foundation. A post-order circular clarified eligibility for CENVAT credit on structural components. The appellant alleged denial of natural justice by the Commissioner.

The Commissioner contended that the appellant admitted using steel items for structural support in manufacturing processes, disqualifying them from CENVAT credit as per precedent decisions. The Commissioner argued that the appellant's submissions were considered, and there was no denial of natural justice. The Commissioner emphasized that conflicting decisions were resolved by a 2010 Larger Bench decision, making the appellant's belief untenable. The Commissioner defended the adjudicating authority's finding of suppression of facts due to insufficient disclosure in monthly returns.

The Tribunal noted inconsistencies in the appellant's statements regarding the use of steel items for structural support. The appellant's initial admission of using steel items for support contradicted their later claim of being components of capital goods. The Tribunal found the Larger Bench decision and the Supreme Court ruling applicable to the facts presented by the appellant. However, the Tribunal acknowledged the appellant's plausible case on the limitation period and bona fide belief due to conflicting precedents. The Tribunal directed the appellant to pre-deposit a specified amount within a deadline for waiver and stay of the remaining dues, considering the lack of financial hardship pleaded by the appellant.