2016 (3) TMI 778 - AT - Central Excise

Denial of CENVAT credit on capital goods - Held that - It is noticed that almost in all cases, the Commissioner has not given any reasons for arriving at the conclusion. He has simply given final conclusion stating that how the same were entitled or not entitled to the capital goods CENVAT Credit. A perusal of the list of the items on which the credit has been denied includes items which have been described as spares in the excise invoice. The items on which credit have been denied are consumables include industrial fans, centrifugal fans, tube assembly, coupling, auto parts etc. It is seen that the impugned order does not give any reasoned findings but is based on presumptions and assumptions. Accordingly, we are constrained to set aside the impugned order and remit the matter once again to the Commissioner to give reasoned findings to arrive at decision. Meanwhile, we find that both sides have cited numerous case law which is relevant for the purpose of reaching the conclusion, the Commissioner will give an opportunity to the appellant to present their case before taking a final decision. - Matter remanded back.

Summary

Issues:
1. Denial of credit on various items claimed as capital goods by the manufacturer.
2. Disallowance of credit based on specific grounds such as consumable nature, non-usage in manufacturing, and lack of relevance to final product.

Issue 1: Denial of Credit on Various Items Claimed as Capital Goods

The appellants, manufacturers of motor vehicles, claimed credit of certain items as capital goods amounting to Rs. 43,52,388.89 for the period April 1994 to December 1994. Two show-cause notices were issued seeking to deny the credit on grounds that the items were not integral to the manufacturing process. The matter was earlier adjudicated, but upon remand by the Tribunal for re-evaluation in light of relevant case laws, a demand of Rs. 22,84,325.56 was confirmed, with a penalty of Rs. 5 lakhs imposed under Rule 173Q of the Central Excise Rules, 1944.

Issue 2: Disallowance of Credit Based on Specific Grounds

The Commissioner disallowed credit on various items like electrodes, hoses, computer parts, and more, citing reasons such as consumable nature, lack of involvement in production, and non-relevance to the final product manufacturing. The appellant argued that the Commissioner disregarded cited case laws without merit evaluation. The Tribunal's decision in Jawahar Mills Ltd. Vs. CCE was referenced, emphasizing that items qualifying as capital goods under specific rules should not be denied credit based on later amendments. The Commissioner's observations were challenged, highlighting discrepancies in reasoning and lack of factual basis for denial.

The Tribunal noted the absence of specific consideration of cited case laws in the Commissioner's order and found the conclusions to be based on assumptions rather than facts. The lack of reasoned findings and reliance on presumptions led to the setting aside of the impugned order. The matter was remitted to the Commissioner for a reevaluation, emphasizing the need for reasoned decisions based on factual analysis rather than assumptions. Both parties' reliance on relevant case laws was acknowledged, and the appellant was granted an opportunity to present their case for a fair decision-making process.

(Pronounced in Court on 10.02.2016)