2009 (1) TMI 251 - AT - Central Excise

Capital Goods Cenvat - The issue in dispute in this case is whether the appellant is eligible to avail the Cenvat credit of the duty paid on TMT Bars, TOR Steel, TMT Rebards, MS Rectangular Bar, MS Bars, etc. etc. held that - It is undisputed that these inputs were received in the factory premises and put to use by the appellant - It is accepted in the show cause notice that the items under dispute were used by the appellant for the construction of structures for supporting the machinery and the Adjudicating Authority in the impugned order comes to a conclusion that there is no evidence - From the photographs shown by the learned Advocate during the hearing, we are convinced that the above items are used as parts of technological structures credit allowed.

Issues Involved:

1. Eligibility of Cenvat credit on certain items used for construction of supporting structures.
2. Recovery of ineligible Cenvat credit and Education Cess.
3. Interest on the recovered amount.
4. Confiscation of goods and structures constructed using the said goods.
5. Imposition of penalty for wrong availment of Cenvat credit.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Certain Items Used for Construction of Supporting Structures:

The appellants, manufacturers of Paper and Paper Board, availed Cenvat credit on various inputs, capital goods, and input services. During the scrutiny, it was found that they took credit on items falling under Chapters 72 and 73, used in the expansion of the plant for constructing civil structures. The lower authorities issued a show cause notice alleging that these items were ineligible for Cenvat credit as they were used for civil structures and not as parts or accessories of machinery used in manufacturing.

The appellant contended that the disputed items were used to support machinery in the manufacturing process. They referenced several Tribunal decisions, including *Divi's Laboratories Ltd. v. CCE, Visakhapatnam* and *Jindal Vijayanagar Steels Ltd. v. CCE, Belgaum*, which supported their claim that such items, when used as supporting structures, qualify as capital goods under Rule 2(b) of the Cenvat Credit Rules.

The Tribunal agreed with the appellant, citing previous decisions where similar items were considered eligible for Cenvat credit when used as part of technological structures supporting manufacturing machinery.

2. Recovery of Ineligible Cenvat Credit and Education Cess:

The Adjudicating Authority ordered the recovery of Rs. 90,16,221/- (CENVAT) and Rs. 1,80,325/- (Education Cess) totaling Rs. 91,96,546/- from the appellant under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944, and Section 93 of the Finance Act, 2004. This recovery was based on the conclusion that the appellant availed ineligible credit on items used for civil structures.

3. Interest on the Recovered Amount:

The Adjudicating Authority also ordered the recovery of interest on the amount mentioned above under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11AB of the Central Excise Act, 1944.

4. Confiscation of Goods and Structures Constructed Using the Said Goods:

The authority ordered the confiscation of the impugned goods and structures constructed using them under Rule 15(1) of the Cenvat Credit Rules, 2004, read with Section 120 of the Customs Act, 1962. However, the appellant was given an option to pay a fine of Rs. 10,00,000/- in lieu of confiscation as per Section 34 of the Central Excise Act, 1944.

5. Imposition of Penalty for Wrong Availment of Cenvat Credit:

A penalty of Rs. 9,00,000/- was imposed on the appellant under Rule 15(1) of the Cenvat Credit Rules, 2004, for wrong availment of Cenvat credit on ineligible capital goods.

Conclusion:

The Tribunal found that the items in question were used by the appellant in the factory premises, and it was undisputed that these inputs were received and used in the factory. The Tribunal referenced several decisions, including *Divi's Laboratories Ltd.*, *Jindal Vijayanagar Steels Ltd.*, and *Bhushan Steel & Strips Ltd.*, which supported the appellant's claim that such items, when used as supporting structures, qualify as capital goods. The Tribunal also considered the Hon'ble High Court of Rajasthan's decision in *Aditya Cement v. Union of India*, which further supported the appellant's position.

The Tribunal concluded that the appellant was eligible to avail Cenvat credit on the disputed items and set aside the impugned order, allowing the appeal with consequential relief.

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