2012 (10) TMI 933 - AT - Central Excise

CENVAT Credit - whether CENVAT credit on structural items such as MS plates, angles, channels etc. as capital goods was admissible to the respondent for the period from March to May, 2009 and the month of January 2010 - Commissioner assessee s appeal on the basis of photographs showed by them - Held that - Though, in their written submissions before the original authority, the party took a contrary stand claiming that the structural items had been used for manufacturing chimney, receiver and condenser, no evidence in support of the claim was adduced. Today the learned counsel has also fairly conceded that no photographs were shown to the original authority. It was before the appellate authority for the first time that the respondent produced photographs in support of the above plea. There is nothing in the impugned order to indicate that the appellate authority inspected the respondent s factory to check the veracity of the claim before it. There is nothing to indicate that the photographs were cross-checked with any other material, nor was the photographer examined to ascertain the veracity of the party s claim. It is unfortunate that a few photographs produced by the party for the first time before the Commissioner(Appeals) were taken in face value and a decision rendered in favour of the party. When the Commissioner(Appeals) observed that it was within the power of the original authority to verify the usage of the items, he was probably oblivious of the fact that the usage claimed by them in the reply submitted by the party was accepted by the original authority and the fact that no photographs were produced by the party before the original authority to support their alternative stand - Decided in favour of assessee.

Summary

Issues: Admissibility of CENVAT credit on structural items as capital goods

Analysis:
1. The appeal revolved around the admissibility of CENVAT credit on structural items like MS plates, angles, channels, etc., as capital goods for a specific period. The Department contended that these items did not qualify as capital goods under Rule 2(a) of the CENVAT Credit Rules (CCR), 2004, leading to an inadmissible credit claim.

2. The respondent initially argued that the items in question were essential for positioning machinery and supporting ancillary equipment, thus qualifying as components, spares, or accessories of specified goods. However, they later changed their stance, claiming the items were used in manufacturing chimneys, receivers, condensers, crucial for producing excisable goods.

3. The adjudicating authority rejected the respondent's arguments, ruling that steel structurals used for machinery support could not be considered capital goods. The authority found no evidence supporting the respondent's claims, resulting in a confirmed duty demand and penalty imposition.

4. On appeal, the respondent reiterated their position, presenting photographs depicting the usage of structural items in fabricating chimneys, receivers, and condensers. The Commissioner(Appeals) was influenced by these photographs, leading to a decision in favor of the respondent.

5. The judgment criticized the Commissioner(Appeals)'s reliance on photographs as insufficient proof of usage, highlighting the lack of verification or cross-checking. It emphasized that the original authority had accepted the respondent's usage claims, as per the plea, without photographic evidence. The judgment ultimately set aside the impugned order, allowing the Department's appeal.