2015 (10) TMI 1192 - AT - Central Excise

Denial of CENVAT Credit - Capital goods - Held that - As per explanation 2 (2) (k) inputs include items used by the manufacturer in the manufacture of capital goods which are further used in the factory of manufacturer. - inputs having been used in the construction of the chimney, which was a part of the pollution control system, the benefit of cenvat credit cannot be denied to them - Penalty imposed is also set aside - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit on cement used for construction of chimney and machinery foundation.
2. Admissibility of Cenvat credit for construction of chimney under the definition of 'capital goods.'
3. Imposition of penalty under Rule 25 of the Central Excise Rules.

Analysis:
1. The appellant availed Cenvat credit of Rs. 1,32,439/- on cement used for construction during September 2007 to February 2008. The credit was denied as a portion was used for the machinery foundation, following a Rajasthan High Court decision that disallowed such credit. The appellant did not contest this denial. However, for the amount used in constructing the chimney, which is part of the pollution control system and falls under the definition of 'capital goods,' the appellant argued for admissibility of the credit. The Tribunal confirmed the demand of Rs. 81,113/- related to the machinery foundation but allowed the credit of Rs. 51,326/- for the chimney construction.

2. Regarding the admissibility of Cenvat credit for the chimney construction, the Tribunal agreed with the appellant's contention that since the inputs were used in the construction of the chimney, which is considered a part of the pollution control system and falls under the definition of 'capital goods,' the credit should not be denied. This decision was based on the interpretation of Rule 2(A) (ii) of the Cenvat Credit Rules and explanation 2 (2) (k) regarding inputs used in the manufacture of capital goods.

3. The Tribunal also addressed the imposition of a penalty of Rs. 10,000/- under Rule 25 of the Central Excise Rules. It was noted that the appellant had reflected the credit in statutory documents, and the issue of availing the credit was contentious and debatable. As there was no evidence of malafide intent on the part of the appellant, the penalty was set aside. The Tribunal concluded the appeal by disposing of it in the above terms, emphasizing that the appellant acted in good faith and within the framework of the relevant rules and regulations.