2013 (12) TMI 929 - AT - Central Excise

Denial of cenvat credit - Goods can be considered as capital goods or not under Rule 2(a) of the CENVAT Credit Rules, 2004 Waiver of Pre-deposit Held that - The matter is highly controversial and actual use of the goods and its nexus with manufacturing activity are very relevant for deciding the issue - On this aspect of the matter, the findings are vague because the lower authorities have concentrated on the type of articles used not its actual use Following Saraswati Sugar Mills Vs Commissioner of Central Excise, Delhi-III 2011 (8) TMI 4 - SUPREME COURT OF INDIA - the applicants are directed to make a pre-deposit of Rupees Fifteen Lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Issues involved:
- Eligibility of CENVAT credit on steel items used in plant upgradation and structural work
- Interpretation of the definition of "capital goods" under CENVAT Credit Rules, 2004
- Time-barred demand for CENVAT credit wrongly taken
- Pre-deposit requirement for admission of appeal

Eligibility of CENVAT credit on steel items used in plant upgradation and structural work:
The case involved the applicant, engaged in cement manufacturing, availing CENVAT credit on steel items like M.S. Angles, M.S. Beams, and TMT bars for plant upgradation and structural work. The Revenue disputed the eligibility of these goods as "capital goods" under the CENVAT Credit Rules, 2004. The applicant argued that they were under a bonafide belief based on previous decisions allowing such credits. The Tribunal considered the actual use of the goods and their nexus with manufacturing activity, emphasizing the importance of determining the specific use of the items. While the lower authorities focused on the type of articles used, the Tribunal referred to the decision in Saraswati Sugar Mills case, holding that CENVAT credit cannot be allowed on materials used for constructing supporting structures.

Interpretation of the definition of "capital goods" under CENVAT Credit Rules, 2004:
The main issue was whether the steel items used by the applicant qualified as "capital goods" as per the CENVAT Credit Rules. The applicant contended that the steel items were utilized in plant upgradation and structural work, including line-2 Kiln upgradation and Coal Handling System. They relied on a Tribunal decision allowing CENVAT credit on similar items used in construction of plant structures. However, the Revenue argued that the goods were used for civil construction purposes only and not in the manufacture of plant and machinery. Citing previous judgments, including those by the Supreme Court, the Revenue contended that materials used for constructing supporting structures are not eligible for CENVAT credit.

Time-barred demand for CENVAT credit wrongly taken:
The issue of time-barred demand arose concerning the CENVAT credit wrongly availed by the applicant. The Revenue pointed out that the applicant had not explicitly declared the use of the goods to the department despite clear decisions against such credits. The Revenue highlighted that the applicant had admitted to availing the credit on the steel items in question and argued that the extended period of limitation could be invoked for demanding the wrongly taken credit. The Tribunal noted that the applicant's own submissions confirmed the availing of the credit during specific periods, eliminating the argument for time-barred demands.

Pre-deposit requirement for admission of appeal:
In the appeal filed by the applicant against the order of the Commissioner (Appeals), a stay application was made for a total waiver of the pre-deposit of duty, interest, and penalties. The Tribunal directed the applicant to make a pre-deposit of Rs.15,00,000 for admission of the appeal, with the remaining adjudged dues' pre-deposit waived and recovery stayed during the appeal's pendency. The compliance deadline for the pre-deposit was set by the Tribunal to ensure the continuation of the appeal process.

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