2017 (7) TMI 679 - AT - Central Excise

CENVAT credit - allegation of fraudulent availment - said amount with interest reversed on being pointed out - penalty - Held that - the allegations in the show-cause notice are general in nature, like, that the appellants had availed the CENVAT credit fraudulently with intention to evade duty and there are no specific allegations as required under the provisions of Section 11AC or Rule 15(2) of the CENVAT Credit Rules, 2004. In the absence of any specific allegations, we hold that the issue seems to be covered by the judgment of the apex court in the case of Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA , where it was held that the assessees had made payment of the demands simply in order to buy peace and to avoid any litigation. In those circumstances the imposition of penalty was wholly unjust - duty with interest upheld - penalty set aside. CENVAT credit - capital goods - MS channels, beams, TMT bars, CTD bars, etc. - Held that - structural items such as MS channels, beams, TMT bars, CTD bars, etc. are held to be eligible for availment of CENVAT credit despite being used for fabrication of support structures for various capital goods. In the case in hand, it is on record that the respondent in this case had used these structural items for fabrication of capital goods which are put to use in the factory premises - reliance placed in the case of Singhal Enterprises Pvt. Ltd. Vs. CC&CE, Raipur 2016 (9) TMI 682 - CESTAT NEW DELHI , where it was held that applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed. CENVAT credit - input services - denial on the ground that these input services were utilised for construction of a factory which is immovable property and is not liable to Central Excise duty or any output services - Held that - the said input services were received by the respondent during the period September 2008 to June 2009. During the relevant period, Rule 2(l) of the CENVAT Credit Rules, 2004 (before its amendment on 01/04/2011) specifically allows the CENVAT credit of the service tax paid on the input services which are used for setting up / renovation / modernisation of factory premises by a manufacturer - similar issue decided in the case of Liugong Indian Pvt. Ltd. Vs. CCE&ST, Indore 2014 (3) TMI 984 - CESTAT NEW DELHI , where it was held that service tax credit on these items can be availed - the services, in question, used for setting up of factory have to be treated as input service and would be eligible for Cenvat credit, as the factory has been setup for manufacture of final products which are liable to Central Excise duty. Therefore denial of Cenvat credit, in question, is contrary to the provisions of Rule 2(l) of Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty on the appellant for availing CENVAT credit fraudulently.
2. Disallowance of CENVAT credit on structural items and service tax paid on input services.

Issue 1: Imposition of penalty on the appellant for availing CENVAT credit fraudulently:
In appeal No.E/22682/2004, the appellant was penalized for availing CENVAT credit of &8377; 5,76,896, alleged to be fraudulently done to evade Central Excise duty. The adjudicating authority found an arithmetical error and an error of judgment in the double credit taken. However, the penalty imposed under Rule 15(2) of the CENVAT Credit Rules, 2004 was set aside due to the absence of specific allegations as required by law. The judgment referenced the case of Rajasthan Spinning and Weaving Mills to support the decision to uphold the duty liability but set aside the penalty.

Issue 2: Disallowance of CENVAT credit on structural items and service tax paid on input services:
In appeal No.E/23436/20014, the Revenue challenged the dropping of demands for disallowing CENVAT credit on structural items like MS angles, beams, plates, and service tax paid on input services for construction activities. The Revenue argued that these items were not eligible for credit as they were not capital goods or inputs per se. However, the Tribunal found that the items were used for fabrication of capital goods and support structures, making them eligible for CENVAT credit. The judgment referred to precedents and Circulars to support the decision. Regarding input services, the Tribunal upheld the credit availed for setting up the factory premises, citing Rule 2(l) of the CENVAT Credit Rules, 2004. The judgment referenced previous cases and authoritative pronouncements to reject the Revenue's appeal and uphold the CENVAT credit on both structural items and input services.

In conclusion, the Tribunal disposed of both appeals by setting aside the penalty in the first case and upholding the CENVAT credit on structural items and input services in the second case, based on detailed legal analysis and precedents.