2016 (11) TMI 922 - AT - Central Excise

Interest on the 50% amount of the credit availed and also imposition of penalty for violation of rules - capital goods and not inputs - Held that - I find that the disputed items are in the nature of consumables and there can be a doubt regarding the same being classified as inputs or capital goods under the Cenvat Credit Rules. The appellants were undisputedly entitled to the credit, however the category could have been either inputs or capital goods . They have paid the interest on the part of credit availed earlier. In these circumstances, I find that there is no justification for imposing any penalty. The appeal is allowed.

Summary

Issues: Classification of goods as inputs or capital goods for availing Cenvat credit, imposition of penalty for violation of rules

Classification of goods as inputs or capital goods for availing Cenvat credit:
The appellant, M/s.Preciforge & Gears, availed credit of certain items as inputs, which the Revenue contended were capital goods. The dispute revolved around whether the goods in question should be classified as inputs or capital goods under the Cenvat Credit Rules. The original adjudicating authority upheld the Revenue's contention partially, leading to an appeal before the Commissioner (Appeals) and subsequently before the Tribunal. The Tribunal, after considering the arguments, concluded that the disputed items were consumables, creating ambiguity in their classification as inputs or capital goods. The Tribunal acknowledged that the appellants were entitled to the credit, and since they had already paid interest on the credit availed, no penalty was justified. Consequently, the appeal was allowed, settling the issue in favor of the appellant.

Imposition of penalty for violation of rules:
The appellant argued that there was no malafide intent on their part while availing the credit, asserting that they believed in good faith that the items were inputs. On the other hand, the Departmental Representative relied on the impugned order to support the imposition of penalties. However, the Tribunal found that since the disputed items could be reasonably classified as either inputs or capital goods, and the appellants had paid interest on the credit availed, there was no justification for imposing any penalty. The Tribunal's decision to allow the appeal implicitly addressed the issue of penalty imposition, providing relief to the appellant in this regard.

In conclusion, the judgment by the Appellate Tribunal CESTAT MUMBAI delved into the classification of goods as inputs or capital goods for availing Cenvat credit, ultimately ruling in favor of the appellant due to the ambiguous nature of the disputed items. The Tribunal's decision also addressed the issue of penalty imposition, determining that no penalty was warranted given the circumstances of the case.