2017 (2) TMI 1043 - AT - Central Excise

CENVAT credit - denial on the ground that the said quantity of Furnace Oil had been used in the fabrication of fixed assets - Held that - As per Accounting standard, for any new project whatever expenses are incurred are to be capitalized and shown in the balance sheet as fixed assets. On basis of merely information indicated in the books of accounts of the respondents, it can not be conclusively said that cenvatable Furnace oil has been utilized for setting up of fixed immovable structures - appeal rejected - decided against Revenue.

Summary

Issues:
- Appeal against availing Cenvat Credit on Furnace Oil
- Allegation of wrong accounting principles
- Use of electricity in fabrication of fixed assets
- Appeal before Ld Commissioner (Appeals)
- New plea raised at first appellate stage
- Capitalization of Furnace Oil expenditure
- Remand request by Revenue
- Submission of Chartered Accountant's Certificate
- Accounting principles followed by Respondent

Analysis:
The case involved an appeal by the Revenue against availing Cenvat Credit on Furnace Oil used for electricity generation in the trial-run production of a project. The respondent had capitalized some Furnace Oil under fixed assets, leading to a demand notice for credit recovery. The Adjudicating Authority dropped proceedings, which was confirmed by the Ld Commissioner (Appeals), prompting the Revenue's appeal. The Revenue argued against a new plea raised at the appellate stage and the capitalization of Furnace Oil expenses. They requested a remand for reconsideration. The respondent contended that the issue of using electricity from the Gujarat State Electricity Board in fabrication was raised earlier. The Ld Commissioner (Appeals) found in favor of the respondent based on accounting principles and a Chartered Accountant's Certificate.

The Tribunal noted the respondent's consistent resistance to the allegation from the beginning of the investigation, emphasizing the use of Furnace Oil in the trial run of production, not in fixed structure fabrication. The Ld Commissioner (Appeals) highlighted the accounting policies adopted by the respondent, capitalizing pre-operative expenses for projects under fixed assets. The Auditors' objection was countered by the respondent's adherence to accounting standards, where expenses for new projects are capitalized. The Chartered Accountant's certificate and accounting principles supported the respondent's position, leading to the rejection of the Revenue's appeal.

In conclusion, the Tribunal upheld the Ld Commissioner (Appeals) decision, finding no merit in the Revenue's arguments regarding the new plea and capitalization of Furnace Oil expenses. The case centered on the proper utilization of Cenvat Credit and the adherence to accounting standards in capitalizing project expenses under fixed assets. The detailed analysis considered the evidence, submissions, and accounting principles, resulting in the rejection of the Revenue's appeal.