2015 (10) TMI 1162 - AT - Central Excise

Denial of CENVAT Credit - capital goods - reversal of credit on damaged parts being replaced - Held that - Appellant received the machines and availed cenvat credit thereof. It was found that some part of the machine were damaged which was replaced by the supplier. There is no dispute that the appellant availed the credit on the entire machine which was received by them and used in the manufacture of final products. A portion of the parts was replaced cannot be reason for denial of the proportionate cenvat credit on the entire machine which was used in the manufacture of final product, as per provision of Cenvat Credit Rules. The main contention of the Learned Authorized Representative for the Revenue is that they have availed insurance claim in respect of the damaged parts. There is no material available that the appellant claimed insurance claim on the cenvat account. - denial of cenvat credit is not sustainable on merit. Hence, the impugned order is set aside - Decided in favour of assessee.

Summary

Issues: Denial of cenvat credit on damaged machinery parts, availability of insurance claim, applicability of Cenvat Credit Rules, reliance on legal precedents, limitation on demand of cenvat credit.

In the case, the appellants were involved in manufacturing Material Handling Equipments under Chapter No 84 of the Central Excise Tariff Act 1985. They received machinery with damaged parts during transit, for which they availed cenvat credit. A show cause notice was issued proposing denial of a specific amount of cenvat credit along with interest and penalty. The Adjudicating Authority and Commissioner (Appeals) upheld the denial. Upon review, it was found that the appellant had availed credit on the entire machine, including the damaged parts replaced by the supplier. The Tribunal noted that the mere replacement of parts should not lead to denial of proportionate cenvat credit on the entire machine used in manufacturing final products, as per Cenvat Credit Rules. The Revenue argued that the appellant had received an insurance claim for the damaged parts, but there was no evidence that the claim was made on the cenvat account. The appellant cited legal precedents, including a Karnataka High Court decision and a Tribunal ruling, to support their case. The Tribunal concluded that the denial of cenvat credit was not justified on merit, setting aside the impugned order without addressing the issue of limitation, and allowed the appeal filed by the appellant.