2015 (1) TMI 1185 - AT - Central Excise

CENVAT Credit on Steatite Ceramic falling under CTH 6804 availed as 100% as inputs instead of 50% as capital goods during the first year - Held that - Although the appellant is not in dispute as these are not capital goods and they are entitled to take CENVAT Credit to the tune of 50% of duty paid in the first year as per Rule 4(b) of Cenvat Credit Rules, 2004. Therefore, for the first year availement of CENVAT Credit is restricted to 50% of the duty paid but the appellant is entitled to take the remaining 50% CENVAT Credit in the subsequent year. In the circumstance, at the most, interest for the intervening period was required to be demanded from the appellant. The adjudicating authority has directed the appellant to reverse the excess 50% of CENVAT Credit for the first year along with the interest and also imposed penalty which were not required. In these circumstances, I dispose of the appeal of the appellant by confirming the demand of interest for the intervening period and setting aside the demand of duty and penalty against the appellant. - Decided partly in favour of assessee.

Summary

Issues:
1. Denial of CENVAT Credit on "Steatite Ceramic" falling under CTH 6804.
2. Applicability of Rule 4(b) of Cenvat Credit Rules, 2004.
3. Imposition of penalty under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Denial of CENVAT Credit on "Steatite Ceramic"
The appellant appealed against the impugned order denying CENVAT Credit on "Steatite Ceramic" used in the manufacture of paints. The Revenue argued that as "Steatite Ceramic" falls under CTH 6804, it is considered a capital good, limiting the appellant's entitlement to 50% CENVAT Credit in the first year. The appellant contended that they are entitled to 100% CENVAT Credit in subsequent years. The Tribunal agreed with the appellant, stating that the appellant can avail 50% CENVAT Credit in the first year and the remaining 50% in subsequent years. The Tribunal upheld the demand for interest for the intervening period but set aside the demand for duty and penalty against the appellant.

Issue 2: Applicability of Rule 4(b) of Cenvat Credit Rules, 2004
The Tribunal clarified that as per Rule 4(b) of the Cenvat Credit Rules, 2004, the appellant is entitled to take 50% CENVAT Credit in the first year for goods falling under CTH 6804. The remaining 50% can be availed in subsequent years. The Tribunal emphasized that the appellant was not in dispute regarding the classification of the goods as non-capital goods and their entitlement to CENVAT Credit as per the rules.

Issue 3: Imposition of Penalty under Section 11AC
The Tribunal referenced a case law where a penalty was imposed on an appellant for contravening Rule 3(4) of the Cenvat Credit Rules, 2004. However, in the present case, the penalty was imposed under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004. The Tribunal distinguished the two cases, stating that the penalty imposed in the referenced case was not applicable to the facts of the current case. Consequently, the Tribunal partly allowed the appeal and provided consequential relief as discussed.

In conclusion, the Tribunal ruled in favor of the appellant, allowing them to avail 50% CENVAT Credit in the first year and the remaining 50% in subsequent years for "Steatite Ceramic." The Tribunal confirmed the demand for interest but set aside the demand for duty and penalty, citing the inapplicability of the penalty provision under Section 11AC in the present case.