2016 (8) TMI 490 - AT - Central Excise

Cenvat credit - HR plates, MS angles, MS flats , MS beams, HR coils and MS channels, plates, GP coils, welding electrodes etc. - used in work shops meant for repair and maintenance of machinery which are used in manufacture of final products - no documentary evidence has been produced as to which goods are used for maintenance of machinery and which goods are used in or in relation to manufacture - Held that - appellant has filed a certificate of Chartered Engineer to the effect that the iron and steel articles as per the statement have been directly used in the manufacturing process only and he has also confirmed that without these articles, manufacturing process is not complete. Along with the certificate he has also produced number of photographs of the various items of inputs and its use in the machinery which is used for manufacture of final products. The certificate of Chartered Engineer was not filed before the authorities below and has been filed before this Tribunal only. Further, it is found that this certificate is vital for determination of the dispute as to whether the goods fall in the definition of inputs or not. In view of this certificate and the case laws cited by the appellant, the impugned order is not sustainable in law and therefore I set aside the order and remand the case back to the adjudicating authority with a direction to decide the case afresh after considering the certificate of Chartered Engineer and the various case laws cited by the appellant. - Appeal allowed by way of remand

Summary

Issues:
Appeal against order-in-appeal upholding order-in-original and rejecting appellant's appeal - Eligibility of goods used in repair and maintenance for CENVAT credit as inputs.

Analysis:
The present appeals challenge a common order-in-appeal affirming the order-in-original that rejected the appellant's appeal. The appellants, engaged in manufacturing sponge iron, MS ingots, and TMT bars, availed CENVAT credit on goods used in repair and maintenance of machinery. A show-cause notice alleged wrongful credit availing on ineligible inputs, leading to demand, interest, and proposed penalty. The appellant argued that these goods, though not covered under the definition of inputs, are integral to the final product's manufacture, essential for plant operation and machinery upkeep. The Commissioner (Appeals) upheld the order-in-original, prompting the present appeal.

The appellant contended that the impugned order failed to recognize the necessity of inputs used in machinery repair and maintenance as integral to final product manufacture. Citing Rule 2(k) on inputs, the appellant argued these goods are crucial for plant operation and machinery efficiency. Contrarily, the respondent argued the disputed goods did not meet the Rule 2(k) definition. The authorities noted the lack of evidence on specific goods' usage in manufacturing or maintenance, leading to the denial of input eligibility. During the appeal, the appellant submitted a Chartered Engineer's certificate and relevant case laws supporting the goods' input classification. This evidence, crucial for determining input eligibility, was not presented earlier. Considering the certificate and case laws, the Tribunal found the impugned order legally unsustainable, remanding the case for fresh adjudication with the new evidence and compliance with natural justice principles.

In conclusion, the Tribunal allowed the appeal by remand, emphasizing the need for the adjudicating authority to reconsider the case with the Chartered Engineer's certificate and case laws in mind. The authority must provide the appellant an opportunity to present evidence, ensuring a reasoned decision in compliance with natural justice principles.