2017 (4) TMI 747 - AT - Central Excise

CENVAT credit - paints - composite contract - there are two parts of each purchase order mainly, (a) Supply of towers (b) Erection and painting of towers. The appellants have paid excise duty on part A and are discharging service tax on part B under the category of Erection, Commissioning and Installation Services, the appellant is availing Cenvat credit of the excise duty paid on paint, which is used in the manufacture of steel tower parts - Held that - the order of Commissioner (Appeals) suffers from a serious infirmity. As rightly pointed out by the ld. Advocate, first two paragraphs containing findings on merits, in para-5 of the Order-in-Appeal, are exactly the same and are reproduced from the order of the adjudicating authority - the Commissioner (Appeals) has not applied his mind properly to the issue and the order has been passed with less than complete application of mind - matter needs to be re-examined properly by the first appellate authority - appeal allowed by way of remand.

Summary

Issues:
Cenvat credit on paint claimed as input; Denial of Cenvat credit; Applicability of 'within the factory of production'; Limitation period for demand; Imposition of penalty.

Analysis:

Cenvat Credit on Paint Claimed as Input:
The case involves the appellants challenging the denial of Cenvat credit on paint claimed as input during a specific period. The appellants argued that the paint is used in the manufacture of steel towers to de-rust them, making it an essential input. They contended that since duty was collected on the paint cleared from the factory, Cenvat credit cannot be denied. The advocate cited relevant case laws to support this argument, emphasizing the importance of the paint in the manufacturing process.

Denial of Cenvat Credit:
The Commissioner (Appeals) rejected the appellant's appeal, leading to the current appeal. The appellate tribunal noted a serious infirmity in the Commissioner's order, highlighting the lack of specific findings on the submissions made by the appellants. The tribunal emphasized the necessity for a thorough re-examination by the first appellate authority to provide detailed and specific findings on the issues raised by the appellant. The matter was remanded for a fresh examination, ensuring a fair opportunity for the appellants to present their case.

Applicability of 'Within the Factory of Production':
The advocate argued against the denial of Cenvat credit based on the concept of 'within the factory of production,' contending that it only applies to specific categories of goods, not including paint used in the manufacturing process. The tribunal did not provide a definitive ruling on this aspect but highlighted the need for a comprehensive review by the first appellate authority.

Limitation Period for Demand and Imposition of Penalty:
The appellant also raised concerns regarding the limitation period for the demand and the imposition of penalties. The advocate cited relevant decisions to support the appellant's position on the limitation issue, emphasizing that the demand should be barred by limitation and no penalty should be imposed. The tribunal did not provide a final decision on these matters but indicated that they should be addressed in the re-examination by the first appellate authority.

In conclusion, the appellate tribunal allowed the appeal by way of remand, directing a fresh examination by the first appellate authority to provide specific findings on the appellant's submissions. The issues of Cenvat credit, applicability of 'within the factory of production,' limitation period for demand, and imposition of penalties are to be reconsidered, ensuring a fair opportunity for the appellants to present their case effectively.