2016 (12) TMI 1043 - AT - Central Excise

CENVAT credit - certain casting and casting articles falling under chapter 73 of the Central Excise Tariff Act, 1985 - This issue was disputable during the relevant period and confronting case laws on the subject were available - Whether equivalent penalty under Rule 15(2) of the Cenvat Credit Rules, 2004; read with Section 11 AC of the Central Excise Act, 1944; is imposable upon the appellant? Held that - The items, on which credit is taken, are used in the capital goods which are further used in the manufacturing activity. The case of the department on merits can be that this casting and casting articles are used in making of support structures for the machinery. This issue was disputable during the relevant period and confronting case laws on the subject were available. The matter was finally decided by the larger bench in the case of Vandana Global Ltd. -vs.-Commissioner of Central Excise, Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) - Under the above factual matrix appellant cannot be visited with equivalent penalty when conflicting views were given on the admissibility of Cenvat credit of such items. Appeal allowed - penalty set aside - decided in favor of assessee.

Summary

Issues:
1. Admissibility of Cenvat credit on certain casting and cast articles as capital goods.
2. Imposition of equivalent penalty under Rule 15(2) of the Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Admissibility of Cenvat credit on certain casting and cast articles as capital goods
The appellant filed an appeal against the Order-in-Appeal upholding the Adjudicating Authority's decision regarding the Cenvat credit of ?3,18,598 on certain casting and cast articles falling under chapter 73251000. The appellant contended that the entire amount of Cenvat credit, along with interest, had been paid, even though there was a case for the admissibility of the credit. The appellant argued that there was a reasonable belief that the items in question were used in the conveyor belt of the machinery, which is an integral part of the capital goods. The Revenue argued that the demand for the extended period had been paid by the appellant, justifying the imposition of an equivalent penalty.

Issue 2: Imposition of equivalent penalty under Rule 15(2) of the Cenvat Credit Rules, 2004
The central issue in the proceedings was whether an equivalent penalty under Rule 15(2) of the Cenvat Credit Rules, 2004, along with Section 11 AC of the Central Excise Act, 1944, could be imposed on the appellant. The credit in question was taken on casting and casting articles used in the manufacturing activity as capital goods. The department's argument was that these items were used in making support structures for machinery. The larger bench decision in the case of Vandana Global Ltd. v. Commissioner of Central Excise established that conflicting views existed on the admissibility of Cenvat credit for such items during the relevant period. Given the disputable nature of the issue and the availability of conflicting case laws, the appellant could not be penalized with an equivalent penalty. The appeal was allowed to the extent of setting aside the equivalent penalty imposed on the appellant by the lower authorities.

This comprehensive analysis of the judgment addresses the issues of admissibility of Cenvat credit on certain casting and cast articles as capital goods and the imposition of an equivalent penalty under the relevant rules and regulations.