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2017 (12) TMI 763 - AT - Central ExciseCENVAT credit - capital goods not installed in factory - crusher unit is installed at the quarry of the appellant - Rule 3(1) of CCR, 2004 - denial of credit on the ground that capital goods / spares which have not been installed in their factory but elsewhere - Held that - crusher unit is located 25 km away from the factory - the geographical distance does not make much difference as has been held in the case of National Aluminium Co. Ltd. Vs. CCE, Madras 1997 (6) TMI 95 - CEGAT, NEW DELHI - but since in this case, the appellant has supplied surplus quantity to others and therefore they have indulged in trading activity also, therefore with regard to input service tax credit proportionate to the credit in regard to trading, case remanded back to the original authority to determine proportionate cenvat credit relating to trading which is ineligible and with regard to the remaining quantity which is consumed as captive consumption, the appellants are entitled to input service tax credit - matter on remand. Penalty u/r 15 of CCR read with Section 11AC of CEA - Held that - appellants have informed the audit party that they have informed the Department vide their letter dt. 25/05/2010 and 04/06/2010 that they are owning the crusher unit which is functioning away from the manufacturing unit - also, availing and utilising cenvat credit was truly and fully reported in the monthly ER1 returns. In view of this, suppression cannot be invoked and penalty cannot be imposed - penalty set aside. Appeal allowed in part and part matter on remand for quantification.
Issues Involved:
- Wrong availment of credit on capital goods / spares - Wrong availment of credit of service tax - Applicability of Rule 3(1) of CENVAT Credit Rules, 2004 - Imposition of penalty under Rule 15 of CCR read with Section 11AC of CEA Analysis: Issue 1: Wrong availment of credit on capital goods / spares The appellants, manufacturers of cement, were found to have wrongly availed CENVAT credit on capital goods installed at a crusher unit away from their factory. The authorities issued show-cause notices demanding recovery of wrongly availed credit, interest, and penalties under relevant provisions. The original authority confirmed the demand, and the Commissioner(Appeals) partly allowed the appeals, setting aside the penalty imposed under Rule 15 of CCR read with Section 11AC of CEA. The appellant argued that the impugned order did not consider facts and evidence properly, citing judicial precedents and technical reasons for the setup of the crusher unit away from the factory. The appellant also highlighted CBEC Circular and Rule 6 of CCR to support their case. Issue 2: Wrong availment of credit of service tax The appellants were also found to have wrongly availed CENVAT credit of service tax paid on services used at the crusher unit, not a registered premises for manufacturing excisable goods. Show-cause notices were issued demanding recovery of wrongly availed credit, interest, and penalties under relevant provisions. The Commissioner(Appeals) upheld the demand, citing the Hon'ble Supreme Court's judgment in Vikram Cement case regarding captive mines and availability of Modvat/Cenvat credit. Issue 3: Imposition of penalty under Rule 15 of CCR read with Section 11AC of CEA The appellant contested the imposition of penalty, arguing that there was no suppression of material facts as they had informed the Department about the setup. The appellant claimed that availing and utilizing CENVAT credit was duly reported in monthly returns, thus suppression could not be invoked, and penalty should not be imposed. The Commissioner(Appeals) dropped the penalty under Rule 15 of CCR but upheld the interest liability. In conclusion, the Appellate Tribunal disposed of the appeals based on detailed arguments presented by both parties, considering precedents, rules, and judgments to decide on the issues of wrong availment of credit on capital goods / spares, wrong availment of credit of service tax, and imposition of penalty under Rule 15 of CCR read with Section 11AC of CEA. The judgment emphasized the importance of compliance with CENVAT rules and proper reporting of credit utilization to avoid penalties.
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