2016 (11) TMI 1104 - AT - Central Excise

CENVAT Credit - whether the Department s view that the capital goods of the co-generation plant including those capital goods which were outside the factory like the transformer, etc., were not eligible for capital goods CENVAT Credit inasmuch as, such equipment did not take part in the processing of sugar/molasses which are dutiable final products, is justified? - Held that - this matter needs to be remanded back to the original authority with a direction to verify whether the appellants have been receiving the power from the State Grid from time to time and where the same was used in the production of sugar. Since this finding has not come in the impugned order as well as in Order-in-Original, therefore, I remand the case back to the original authority with the direction to verify these facts on the basis of documents produced by the appellant. The original authority shall decide the matter within a period of three months from the receipt of copy of this order and also afford an opportunity to the appellant to produce the documents, if any, and thereafter pass a reasoned order - appeal allowed by way of remand.

Summary

Issues:
1. Eligibility of CENVAT credit on capital goods for a co-generation plant.
2. Interpretation of CENVAT Credit Rules, 2004.
3. Application of case laws in determining CENVAT credit eligibility.
4. Verification of power usage for production of sugar.

Analysis:
1. The appellant, a sugar and molasses manufacturer, availed CENVAT credit on capital goods for a co-generation plant. The Department objected, stating that certain capital goods, including those outside the factory, were not eligible for credit as they did not participate in sugar/molasses processing. A show-cause notice was confirmed by the Joint Commissioner, upheld by the Commissioner (A), with a reduced penalty. The appellant appealed, arguing that the equipment was used for sugar production and CENVAT credit was valid.

2. The appellant contended that the impugned orders lacked legal basis, ignored evidence, and misinterpreted the equipment's usage. The Commissioner (A) concluded that the equipment outside the factory did not contribute to production, thus not eligible for credit. The appellant cited agreements with the State Electricity Board to show power usage for sugar production, supporting their entitlement to CENVAT credit. Despite the appellant's submissions, both authorities upheld the denial of credit.

3. The appellant referenced case laws supporting their position, but the Commissioner (A) deemed them inapplicable. The appellant argued that the equipment facilitated sugar production by providing power when needed, linking it to the manufacturing process. The learned advocate highlighted the documentary evidence supporting power usage for sugar production, which was disregarded by the authorities.

4. The learned AR supported remanding the case for verification of power usage for sugar production. The Tribunal, after considering both parties' submissions, remanded the matter to the original authority. The original authority was directed to verify power usage based on appellant's documents within three months and provide an opportunity for further evidence. The appeals were allowed by way of remand, emphasizing the need for factual verification regarding power usage for sugar production.

This detailed analysis of the judgment highlights the issues, arguments presented, legal interpretations, and the Tribunal's decision to remand the case for further verification, ensuring a comprehensive understanding of the legal complexities involved in the matter.