2017 (7) TMI 474 - AT - Central Excise

CENVAT credit - inputs - angles - plates - MS angles - MS joists/shapes/sections - channels - whether the goods have been used as inputs for manufacturing capital goods in the factory? - Held that - At the time of visit of the officers, the director of the company had clearly admitted that they had wrongly taken the credit on these items and therefore, reversed the same - The appellants have admitted during the hearing that they had not declared anywhere that the capital goods were captively manufactured from the impugned goods in their factory and that no declaration had been made in the ER-1. In this backdrop, the production of Chartered Engineer certificate issued after two years to co-relate the use and consumption to manufacture of EOT crane and other items appears to be an attempt to justify irregularly used Cenvat credit - the case of Bajaj Hindustan Limited 2013 (9) TMI 536 - CESTAT, NEW DELHI , is directly applicable to the case, where the Tribunal held that the structural steel items used at the time of commissioning of new plant for production of the capital goods are not eligible for credit as inputs and that ER-1 returns did not declare their use in the manufacture of capital goods. Penalty - Held that - Since the credit was irregularly taken and there is no production of capital goods under Notification No.67/95 dt.16.3.1995 and no declaration was made by the appellant in the ER-1, the penalty has been correctly imposed on the appellant. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Availment of Cenvat credit on certain goods as inputs for manufacturing capital goods.
2. Validity of Chartered Engineer certificate submitted by the appellant.
3. Admissibility of case laws presented by both parties.
4. Imposition of penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules.

Issue 1: Availment of Cenvat credit on certain goods as inputs for manufacturing capital goods:
The appellant, a manufacturer of M .Pipes/G I Pipes, availed cenvat credit on angles, plates, MS angles, MS joists/shapes/sections, and channels as inputs. However, upon inspection, it was found that the credit was irregularly taken. The director admitted to this irregularity and reversed the credit. The Tribunal found that the impugned goods were not used as inputs for the products manufactured by the appellant. The Chartered Engineer certificate submitted later was deemed insufficient to establish the correlation between the goods and the manufacture of capital goods. The appellant failed to declare the captive consumption of the impugned goods in the ER-1. The Tribunal concluded that the goods were not used for manufacturing capital goods, leading to the dismissal of the appeals.

Issue 2: Validity of Chartered Engineer certificate submitted by the appellant:
The appellant submitted a Chartered Engineer certificate to support the utilization of the impugned goods for manufacturing capital goods. However, the certificate was obtained two years after the credit was taken, making it difficult to quantify the usage accurately. The Tribunal noted that the items claimed as capital goods were already installed before the certificate was issued, and the director did not reference these items in his statement. Consequently, the Tribunal considered the certificate an attempt to justify the irregularly used Cenvat credit, contributing to the dismissal of the appeals.

Issue 3: Admissibility of case laws presented by both parties:
The appellant relied on various case laws to support their claim of using the impugned goods for manufacturing capital goods. However, the Tribunal found these case laws inapplicable to the present case as they dealt with different scenarios such as inputs for repair and maintenance or fabrication of goods for R&D purposes. The case laws cited by the appellant did not align with the specific circumstances of the case, leading the Tribunal to reject their applicability and dismiss the appeals.

Issue 4: Imposition of penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules:
The Tribunal upheld the imposition of a penalty on the appellant for irregularly availing Cenvat credit without utilizing it for manufacturing capital goods. Citing a judgment of the Hon’ble Allahabad High Court, the Tribunal emphasized the manufacturer's responsibility to ensure correct Cenvat credit claims and maintain proper records. The Tribunal concluded that the appellant's actions amounted to willful suppression of material facts and contravention of excise laws, justifying the penalty imposed. Consequently, the appeals were deemed devoid of merit and dismissed.

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