2017 (4) TMI 1214 - AT - Central Excise

CENVAT credit - duty paying invoices - appellants are claiming the benefit of Cenvat Credit as capital goods for GP Sheets and Aluminum Sections on the basis that humidification plant was machinery as a whole under Chapter 84 and not a plant - the air duct being manufactured from the GP Coils/GP Sheets has been claimed as part of humidification machine which takes shape of plant after the installation of air ducts in different places in the factory premises - Held that - reliance placed in the case of CCE, Chandigarh Vs. Modern Steel Ltd. 2006 (12) TMI 410 - CESTAT, NEW DELHI , where it was held that It is evident from the deliberate change in the definition of capital goods by omitting plant as well as components, spare parts and accessories of plant thereof there has come about a major shift in legislative intent, because plant was capable of a very wide meaning - the Ld. Commissioner (Appeals) has rightly rejected the claim of the appellants that the impugned goods are either capital goods or parts of the capital goods. As for the claim of the appellants that the impugned goods be treated as inputs, I find that these goods are not used in or in relation to manufacture of final products and they are also not used in the manufacture of capital goods which are further used in the factory of manufacturer. Hence, this claim is also not tenable. Extended period of limitation - penalty - Held that - The irregular availment of Cenvat Credit was revealed by the Audit of the party and came to the notice after examining their documents - the extended period has rightly been invoked and penalty has rightly been imposed. As for the interest, the same is compensatory in nature. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Excess Cenvat credit amounting to ?86,894.
2. Cenvat credit amounting to ?68,381 on the strength of an invoice issued by a non-registered dealer.
3. Capital goods Cenvat credit of ?7,67,824 without the duplicate or original invoice.
4. Cenvat credit of ?5,93,453 on aluminum sections/profiles and G.P. Sheets/Coils under the category of Capital Goods.

Issue-wise Detailed Analysis:

1. Excess Cenvat Credit Amounting to ?86,894:
The appellants did not contest the demand related to this issue. The Ld. Commissioner (Appeals) upheld the demand, interest, and penalty.

2. Cenvat Credit Amounting to ?68,381 on Invoice from Non-Registered Dealer:
Similarly, the appellants did not contest this issue. The Ld. Commissioner (Appeals) upheld the demand, interest, and penalty.

3. Capital Goods Cenvat Credit of ?7,67,824 Without Invoice:
The Ld. Commissioner (Appeals) did not sustain this demand. Hence, this issue was not contested further in the appeal.

4. Cenvat Credit of ?5,93,453 on Aluminum Sections/Profiles and G.P. Sheets/Coils:
The appellants contested this issue, arguing that the humidification plant, which includes ducts made from G.P. Sheets, is machinery under Chapter 84 and should be considered capital goods. They cited the Chartered Engineer certificate and argued that ducts are essential for the humidification plant's function. They also argued that tubes and pipes include air ducts and should be considered capital goods. Alternatively, they claimed entitlement to credit as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. Regarding the penalty, they argued that the credit was taken wrongly but not fraudulently, hence no penalty and interest should be levied.

The Revenue countered that the definition of capital goods under Rule 2(a) of the Cenvat Rules does not include "Plant" or "components, spare parts, and accessories of plant." They relied on the case of CCE, Chandigarh Vs. Modern Steels Ltd., which clarified that the new definition of capital goods excludes plant-related items.

Tribunal's Findings:
The Tribunal found that the appellants' reliance on previous case laws was misplaced as those pertained to the period when Rule 57(Q) was in force, which included "plant" in the definition of capital goods. The current case falls under the revised Cenvat Credit Rules post-2002, which deliberately omitted "plant" and related components from the definition. The Tribunal upheld the Ld. Commissioner (Appeals)'s decision, stating that the GP Sheets and Aluminum Sections could not be treated as capital goods or parts thereof.

Claim as Inputs:
The Tribunal also rejected the appellants' alternative claim to treat the impugned goods as inputs, as these goods were not used in or in relation to the manufacture of final products or capital goods used in the factory.

Penalty and Extended Period:
The Tribunal upheld the imposition of penalty and the invocation of the extended period, citing that the appellants had taken Cenvat credit despite the clear change in law and had not reversed the credit even when asked by the Department. The Tribunal referenced the case of CCE, Ghaziabad Vs. Rathi Steel & Power Ltd., which supported the invocation of the extended period and imposition of penalty for willful suppression of facts.

Interest:
The Tribunal affirmed that interest is compensatory in nature, as established by the Hon’ble Apex Court in Pratibha Processors Vs. UOI, and upheld the demand for interest.

Conclusion:
The Tribunal found no infirmity in the order of the Ld. Commissioner (Appeals) and dismissed the appeal, sustaining the demand, interest, and penalty related to the contested issues. The order was pronounced in the open court on 20.02.2017.