2016 (3) TMI 522 - AT - Central Excise

CENVAT credit disallowed - steel items used for the supporting structures - Held that - As find that the Supdt. Central Excise vide letter dated 20.12.2014 has taken note of the intimation of the appellant that it had not availed Cenvat credit on 255.300 MT of steel items used for the supporting structures as it purchased the same under non-cenvatable documents. The Supdt., Central Excise has not disputed this fact. The adjudicating authority has stated that in the absence of any supporting documents it cannot be ascertained whether the appellant had availed Cenvat credit on 255.300 steel or not. I do not find the said reasoning sufficient to disallow credit in relation to 255.300 MTs of steel particularly when the appellant categorically stated that the said steel was obtained under non-cenvatable documents and the same has at no stage been controverted by Revenue. The Supdt., Central Excise in its letter dated 20.12.2014 has noted the appellant s submission in this regard and has not disputed the same. In addition Chartered Engineer s certificate given also certifies that Cenvat credit on 255.300 MTs of steel was not taken. Therefore the demand relating to this quantum of steel which works out to ₹ 8,01,724/- is not sustainable. Regarding 131.930 MTs of steel items eg. beams, joists, channels, angles, flat etc. used for supporting structures, the appellant is only claiming the benefit on the ground of time bar and not on merit. There is no confusion or ambiguity that steel used for supporting structures would neither fall under the category of capital goods nor inputs as defined under Cenvat Credit Rules and therefore the credit thereon is not admissible, because the definition of capital goods or inputs by any stretch of imagination could not be understood to include steel used supporting structures within their ambit. Bona fide belief is a belief of reasonable person operating in an appropriate environment. Thus the contention of the appellant regarding bonafide belief that credit on 131.930 MT was admissible is untenable. The appellant has conceded inadmissibility of Cenvat credit of ₹ 48,000/- As regards the welding electrodes it has been held by CESTAT in the case of Vikram Cement Vs. CCE, Indore (2009 (7) TMI 217 - CESTAT, NEW DELHI ) that credit on welding electrodes is not available when used for repair. The appellant has only stated that some of these electrodes may have been used for manufacturing capital goods but has conceded that it has no evidence thereof. Therefore the demand relating to welding electrodes is also sustainable - Decided partly in favour of assessee

Summary

Issues:
- Disallowance of Cenvat credit and imposition of mandatory penalty.

Analysis:
The appeal was filed against an order disallowing Cenvat credit of Rs. 12,50,458 along with interest and imposing an equal mandatory penalty. The breakdown of the disallowed credit included amounts for supporting structures, procurement of supporting structures, and welding electrodes. The appellant argued that they did not avail credit on certain steel items used for supporting structures due to non-cenvatable invoices, which was confirmed by the Supdt., Central Excise, and supported by a C.A. certificate. The appellant also claimed confusion during the relevant period for another set of steel items, arguing for time-barred demands. Regarding welding electrodes, the appellant admitted to a component of Rs. 48,000 but lacked evidence of some electrodes being used for manufacturing capital goods. The appellant requested the option to pay reduced mandatory penalty, which was not extended by lower authorities.

The Departmental Representative supported the impugned order, citing a Bombay High Court judgment regarding the extension of reduced mandatory penalty. The judge considered both sides' contentions and found that the appellant did not avail Cenvat credit on certain steel items used for supporting structures as claimed, supported by documentation and certificates. However, the judge ruled that credit for other steel items used for supporting structures was inadmissible due to not falling under the definition of capital goods or inputs. The judge also found the demand related to welding electrodes to be sustainable due to lack of evidence supporting their use for manufacturing capital goods.

The judge referenced a Gujarat High Court judgment stating that the option of a reduced penalty should be extended even if not given at lower levels. Disagreeing with the Bombay High Court judgment, the judge followed the reasoning of the Gujarat High Court, Delhi High Court, and Punjab & Haryana High Court regarding the imposition of mandatory penalty under Section 11AC. Consequently, the judge partly allowed the appeal, reducing the disallowed Cenvat credit and penalty to Rs. 4,48,734 each. The penalty would be further reduced to 25% of the revised Cenvat credit demand if paid within 30 days of the order receipt.