2015 (10) TMI 1838 - AT - Central Excise

Admissibility of Cenvat Credit - Capital goods - Held that - Items like MS Plates, Beams, Channels, Angles etc., when used in the repair of the capital goods would be eligible for cenvat credit but the same item when used in the making of support structures will not be eligible to Cenvat Credit. - items are only used for maintenance and repairs of their capital goods and not for making supporting structures. Reliance placed by the Learned Consultant on the list of items, duly verified by the jurisdictional Central Excise officers also do not throw any light as to where the items like MS Plates, Angles, Channels, TMT Bars etc are used. The matter is, therefore, required to be remanded back to the Adjudicating Authority to ascertain the use of these items and decide the same in view of the law laid down by CESTAT and the Supreme Court in the relied upon cases by both sides. Appellant is at liberty to produce the documents/chartered engineers certificate to the adjudicating authority to the effect that the inputs for which Cenvat Credit is claimed are used only in the maintenance and repair of the capital goods. Needless to say that the Adjudicating Authority shall give an opportunity of personal hearing to the appellant before deciding the case in the remand proceedings. So far as imposition of equivalent penalty upon the appellant is concerned, it is observed that the issue of taking of Cenvat Credit on the impugned items was the subject matter of interpretation and has been answered by the courts as late as 2011. Therefore, no penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise 1944 is attracted as the period involved in the present proceedings is from 2005-2010. - Decided in favour of assessee.

Summary

Issues:
Admissibility of Cenvat Credit on items like MS Angles, Channels, etc.

Analysis:
The appeal pertains to the confirmation of a demand by the Adjudicating Authority disallowing Cenvat Credit under Rule 14 of the Cenvat Credit Rules 2004, along with interest and imposition of a penalty under Rule 15(2) of the Cenvat Credit Rules 2004 read with Section 11AC of the Finance Act 1944. The appellant argued that the items in question were used in the repair of capital goods or making functional attachments, making them eligible for Cenvat Credit as per a Supreme Court judgment. The Revenue contended that the items were used in making support structures and cited a case law to support their argument.

The Tribunal considered the arguments and case laws presented by both sides. It observed that the issue revolved around the admissibility of Cenvat Credit on items like MS Angles, Channels, etc., used in the factory premises. Referring to relevant case laws, the Tribunal noted that Cenvat Credit for items used in repairs and maintenance of capital goods is admissible, while the same items used for making support structures are not eligible for Cenvat Credit. The Tribunal highlighted the importance of the "user test" in determining whether items are integral parts of machinery, thereby qualifying as capital goods.

Given the lack of a Chartered Engineer's certificate to support the appellant's claim regarding the use of the items, the Tribunal decided to remand the case back to the Adjudicating Authority for further examination. The appellant was granted the opportunity to provide necessary documentation to establish that the items were used solely for maintenance and repair of capital goods. The Adjudicating Authority was instructed to consider the relevant case laws cited by both parties during the remand proceedings.

Regarding the imposition of a penalty, the Tribunal noted that the issue of Cenvat Credit on the items in question had been clarified by courts as late as 2011. As the period involved in the proceedings was from 2005-2010, no penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise 1944 was deemed applicable. Consequently, the appeal was allowed by way of remand, and the appellant was directed to provide necessary documentation for further consideration by the Adjudicating Authority.