2007 (8) TMI 163 - AT - Central Excise

Cenvat Credit Sugar Factory - Eligible capital goods Goods not used for any specific purpose can not be considered as part of machinery Hence, credit not available as capital goods Penalty of an equal amount of credit is unsustainable, when there are conflicting views

Summary

Issues:
Challenge to order confirming demand under Rule 12 of Cenvat Credit Rules, 2002 and penalty imposition.

Analysis:
The appellant contested the Commissioner (Appeals) order upholding the demand of Rs. 55,476 under Rule 12 of the Cenvat Credit Rules, 2002, and the penalty imposed. The Revenue alleged wrongful availment of Cenvat credit on various items. The appellant argued that these items were used for specific purposes in the sugar mill plant and machinery maintenance. The adjudicating authority deemed the items ineligible for Cenvat credit, emphasizing that welding electrodes were only for maintenance. The Appellate Commissioner concurred, ruling all three items unsuitable for Cenvat credit.

Regarding welding electrodes, the matter was deemed settled by precedent cases. The decision in Jaypee Rewa v. CCE established that welding electrodes were not eligible for Cenvat credit. This ruling was followed in subsequent cases, leading to the denial of Cenvat credit for welding electrodes in this instance. Plain plates were also considered ineligible as capital goods under Rule 2(b) of the Cenvat Credit Rules, 2002. The appellant failed to provide evidence of specific use, leading to the conclusion that plain plates were used for general repair and maintenance, not qualifying for Modvat credit.

The appellant argued that plain plates were integral to manufacturing machinery, but without specific evidence, the authorities rightly disallowed Cenvat credit. In the case of jointing gasket sheets, asbestos, and graphite lub packing, previous decisions deemed them eligible for Modvat credit as capital goods. These items were considered components or accessories of machinery, essential for plant operation. Asbestos gaskets, for instance, were crucial for boilers and other machinery to function. The denial of Cenvat credit for these items was overturned, with the appellant vindicated for the Rs. 20,592 credit taken. Due to conflicting views at the time, the penalty corresponding to wrongly taken Cenvat credit for welding electrodes was deemed unsustainable, aligning with Tribunal precedents. Consequently, the appeal was partly allowed, with the disallowed credit for jointing gasket sheets and related items set aside.

In conclusion, the judgment addressed the challenge to the demand under Rule 12 of the Cenvat Credit Rules, 2002, and the penalty imposed. It analyzed the eligibility of various items for Cenvat credit, citing precedents and specific usage contexts. The decision clarified the ineligibility of certain items while overturning the denial of credit for jointing gasket sheets and related materials.