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2016 (12) TMI 645 - AT - Central ExciseDisallowance of credit on capital goods - Conveyor Belt - Circular Bottom Plate - Rubber goods - Steel wire ropes - Wire woven Mesh - during the period February, 2010 to March, 2010 - Held that - the definition of capital goods includes spare/ components/accessories of capital goods specified under chapter 82, 84,85 or 90 of Central Excise Tariff Act, 1985 - it is revealed that the subject goods are spares parts of capital goods which are used in the manufacturing activity by the appellant. Further, it is also seen that for earlier period, vide Order-in-Original dated 23-07-2010 the adjudicating authority has allowed credit on all these subject items and dropped the proceedings. Although the department filed appeal against such order before the Commissioner(Appeals), the same was dismissed vide Order-in-Appeal dated 07-03-2011 - For the reasons that the subject goods fall within the definition of capital goods being spare/ components /accessories of capital goods and also taking note of the fact that the appellant has been allowed credit for the earlier periods, I hold that the demand is unsustainable. The impugned order is set aside - appeal allowed - decided in favor of assessee.
Issues:
Disallowance of credit on capital goods availed during February 2010 to March 2010. Analysis: The appellant, a manufacturer of excisable goods, was denied Cenvat credit on capital goods amounting to ?1,50,803/- for the period of February to March 2010. The show cause notice issued proposed to disallow the credit along with interest and imposition of penalty. The original authority confirmed the demand and interest but dropped the penalty. The Commissioner(Appeals) upheld the decision, leading to the current appeal. The appellant argued that the goods for which credit was taken qualify as capital goods as they are spares/components/accessories of capital goods. The denial of credit by the original authority was based on the lack of details regarding the usage of the goods and the purpose for which each item was used. Interestingly, the same adjudicating authority had previously dropped proceedings for the earlier period, recognizing these goods as eligible for credit. On the department's side, it was contended that the subject goods did not meet the definition of capital goods and hence were ineligible for credit. The definition of capital goods includes spare/components/accessories specified under certain chapters of the Central Excise Tariff Act, 1985. During the hearing, the appellant's counsel provided details of the subject goods and their usage in capital goods/machinery within the factory. The items were shown to be integral parts of various machinery and equipment used in the manufacturing process. After considering the arguments and evidence presented, it was established that the subject goods indeed qualified as spares parts of capital goods used in the manufacturing activity. Moreover, it was noted that for the earlier period, credit on these items had been allowed, and the department's appeal against it had been dismissed. Therefore, the demand for disallowance of credit was deemed unsustainable, and the impugned order was set aside. The appeal was allowed with consequential reliefs, if any.
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