2017 (1) TMI 534 - AT - Central Excise

Recovery of CENVAT credit - capital goods - demand on the ground that the capital goods being exclusively used in the manufacture of exempted final product viz. urea - Held that - I observe from the categorical submission advance by the Appellant that they are engaged in the manufacture of both dutiable as well as exempted products during the relevant period. No reason found to deny them balance 50% credit availed in April 2008, when the capital goods received in the year 2007, and the Department has not disputed admissibility of credit on said invoices in allowing the first installment of 50% credit in the financial year 2007-08 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Original (OIA) passed by Commissioner (Appeals) regarding denial of CENVAT Credit on capital goods exclusively used in the manufacture of exempted final product.

Analysis:
The case involved an appeal against an OIA passed by the Commissioner (Appeals) concerning the denial of CENVAT Credit on capital goods used in the manufacture of exempted final product, urea, by the Appellants. The Appellants were engaged in manufacturing fertilizers Grade Urea, exempted from duty, along with dutiable products like Ammonia, liquid carbon dioxide, and dry ice. A Show Cause Notice was issued for the recovery of CENVAT Credit amounting to ?1,30,595/-, alleging that the credit on capital goods exclusively used in urea production was inadmissible. The demand was confirmed with a penalty under Rule 15(2) of CENVAT Credit Rules 2004 and Section 11AC of the Central Excise Act, 1944. The Appellant's appeal before the Commissioner (Appeals) was rejected, leading to the present appeal.

The Appellant contended that they received capital goods in 2007, against which they availed 50% of the credit in the same financial year and the remaining 50% in April 2008. The Department disputed the admissibility of credit for April 2008, citing the exclusive use of capital goods in urea production. The Appellant argued that they also manufactured dutiable products during the relevant period and that the capital goods were not received in April 2008 as assumed. The Appellant's submission highlighted the incorrect basis of the Show Cause Notice and authorities' findings, emphasizing their dual manufacturing activities. The Appellant asserted that the balance 50% credit availed in April 2008 should not be denied since the goods were received in 2007, and the Department did not dispute the initial credit installment in the financial year 2007-08.

The Authorized Representative for the Revenue supported the findings of the Commissioner (Appeals), emphasizing the relevance of the goods' receipt date for availing CENVAT Credit. After hearing both sides and examining the evidence, the Member (Judicial) found that the Appellant had availed credit on parts in 2007 and 2008, with the goods received in 2007. The Show Cause Notice lacked specific details and erroneously assumed goods receipt in April 2008. The Member noted the Appellant's dual manufacturing activities and concluded that the balance 50% credit availed in April 2008 should not be denied. The impugned order was set aside, and the appeal was allowed with consequential relief, if any, as per law.

In conclusion, the judgment highlighted the importance of considering the actual receipt date of capital goods for availing CENVAT Credit and emphasized the need for specific details in Show Cause Notices. The decision favored the Appellant based on the evidence presented, acknowledging their mixed manufacturing activities and the incorrect premise underlying the authorities' findings.