2014 (12) TMI 80 - AT - Central Excise

Waiver of pre-deposit of duty - CENVAT Credit - capital goods - MS Angles, Channels, Joists, Chassis, Plates, HR Steet, Round, Beams, TMT Bars etc - penalty imposed under Rule 15(2) read with Section 11AC - Held that - In the show cause notice, it has been alleged that since these items are classified under Chapter No.72 of CETA, 1985, hence, they are not eligible to avail the CENVAT Credit on the same as these item do not fall under the scope of the definition of capital goods. However, taking into consideration the reply filed by the Applicant, in the impugned Order, the ld. Commissioner observed that these items were not used in or in relation to the fabrication of the capital goods, but used as structures. We find from the impugned Order that the ld. Commissioner s finding is not supported by any verification on the claim of the Appellant advanced in their reply to the Notice regarding its use in the fabrication of capital goods. Both sides agree that in similar cases of other units of the Appellant, necessary verifications were carried out by the field formation, and consequently, on the basis of such verification, findings were recorded. However, we find that in the present case, the Department had not verified the claim of the Appellant - Matter remanded back - Decided in favour of assessee.

Issues:
Application seeking waiver of pre-deposit of duty and penalty under CENVAT Credit Rules, 2004.

Analysis:
The appellant sought waiver of pre-deposit of duty amounting to Rs. 12.00 crore and an equal penalty imposed under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The appellant had availed CENVAT Credit on various steel items falling under Chapter No.72 of the CETA'85, claiming them as 'inputs' used in the fabrication of capital goods inside the factory premises. They received 42,300 MT of steel items, used 37,970 MT in the fabrication of capital goods, and availed credit on 33,497 MT. The remaining 4,473 MT was used in civil structures and shed work without availing CENVAT Credit. The show cause notice alleged that these items did not qualify as 'capital goods' under Rule 2(a) of the CENVAT Credit Rules, 2004. The Commissioner's order did not specifically address the appellant's detailed submission on the use of these items in the fabrication of capital goods, leading to the appeal seeking a remand for proper verification.

The Revenue argued that the items were not used in the fabrication of capital goods but in structures, based on the Commissioner's findings without further verification. The Revenue accepted the need for verification and did not object to remanding the case for the same. The appellant agreed to verification of their claim and committed to providing a Chartered Engineer's Certificate to support their assertion. After hearing both parties, the Tribunal decided to dispose of the appeal without pre-deposit requirements and to address the core issue of whether the steel items qualified as 'inputs' for availing CENVAT Credit.

The Tribunal found that the key issue revolved around whether the steel items procured by the appellant were used in or in relation to the fabrication of 'capital goods' as defined under the CENVAT Credit Rules, 2004. While the Commissioner's order concluded that the items were not used in relation to capital goods, no verification supported this finding. The Tribunal noted that in similar cases of other units, verifications were conducted before arriving at conclusions, which was lacking in the present case. Consequently, the matter was remanded to the Commissioner for a fresh decision after verifying the appellant's claims regarding the use of the disputed items. The Department was directed to conduct necessary verifications, provide a copy of the Verification Report to the appellant, and grant an opportunity for a hearing. The appeal was allowed by way of remand, keeping all issues open, and the stay petition was disposed of.

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