2014 (6) TMI 650 - AT - Central Excise

CENVAT credit - availment on MS/HR plates used for fabrication of capital goods - Held that - Commissioner has failed to discuss the issues in detail. Commissioner has observed that the assessee had admittedly imported plant and machinery under project imports and nowhere they had stated that they had procured only parts of the machinery under Project Import Scheme; since under project imports complete machinery is imported, MS sheets and HR plates have been used for fabrication of structurals and other capital assets. The observation in this paragraph shows that the Commissioner came to the conclusion that the appellant is not eligible for the credit because under project import full machinery would have been imported and therefore MS plates/HR sheets must have been used for structurals. The submission made by the appellant regarding actual use of MS plates/HR sheets have not been considered at all. Moreover the fact that the appellant factory was being set up and therefore parts would have been fabricated has also not been taken into account. Impugned order suffers from non-consideration of all the submissions made by the appellants and the issues in proper perspective. - matter remanded back - Decided in favour of assessee.

Summary

Issues:
CENVAT credit availed on MS/HR plates for capital goods fabrication and on various input services deemed inadmissible, imposition of penalty, and demand for interest from March 2011 to December 2011.

Analysis:
1. The appellant contended that the respondent failed to understand crucial aspects, such as the necessity of machinery for cement manufacturing, classification under Chapter 84 of the Central Excise Tariff Act, and the significance of Section Notes 3, 4, and 5 of Section XVI while defining 'capital goods' under the CENVAT Credit Rules, 2004. The appellant argued that the use and classification of capital goods should determine their eligibility for credit, emphasizing that the impugned order lacked discussion on essential components like pre-heater cyclones, ducts, bins, hoppers, chutes, and silos.

2. The appellant further asserted that the respondent overlooked the nature of a cement factory, its operations, and the specific machinery required for cement manufacturing. The absence of any analysis on these critical aspects in the impugned order was highlighted, with the appellant emphasizing that reliance on previous decisions without substantive reasoning was unjustified.

3. The appellant argued for a broad interpretation of the definitions of inputs and input services under the CENVAT Credit Rules, emphasizing that the provisions should not be narrowly construed to deny legitimate claims. The appellant criticized the respondent for failing to acknowledge the broad scope of the definitions and for misinterpreting the beneficial provisions, which could hinder the purpose of claiming CENVAT credit.

4. Upon reviewing the records and the impugned order, the Tribunal acknowledged the appellant's contentions, noting that the Commissioner inadequately addressed the issues. The Tribunal specifically highlighted a paragraph in the order where the Commissioner's conclusion regarding the use of MS plates/HR sheets for fabrication lacked thorough consideration of the appellant's submissions on the actual usage and the context of setting up a new factory.

5. Consequently, the Tribunal found merit in the appellant's arguments and decided to set aside the impugned order, remanding the matter to the original adjudicating authority for a comprehensive reevaluation of all issues. The Tribunal emphasized the necessity of considering the appellant's points and providing a fair opportunity for presenting their case to reach a well-founded decision.

6. Additionally, the Tribunal addressed the Revenue's stay application and appeal concerning the demand for CENVAT credit on input services, directing the Commissioner to review these issues alongside the appellant's appeal during the fresh adjudication process. The Tribunal's decision to remand the matter for reconsideration aimed to ensure a thorough examination of all aspects and a just outcome.