2017 (12) TMI 1492 - AT - Central Excise

CENVAT credit - panels, part of boiler - Circular No.956/09/2012 dt. 18/05/2012 - Held that - 3 no. VFD panels are part of the boiler which is used in connection with the manufacture of final product and therefore in view of the Circular No.956/09/2012 dt. 18/05/2012, the denial of credit is not sustainable in law - credit allowed. Interest - penalty - credit taken earlier, reversed - appellant have only availed the CENVAT credit and not utilised the same and subsequently reversed - the appellants are a state government undertaking and allegation of fraud and suppression cannot be alleged against government undertaking - interest and penalty set aside - relying in the case of Commissioner Vs. Bill Forge (P) Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it was held that if the CENVAT credit is availed but not utilised and is reversed then the assessee is not liable to pay interest. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility of CENVAT credit on specific invoices
- Allegations of contravention of CCR rules
- Denial of credit, interest, and penalty imposition
- Applicability of judicial precedents on government undertakings

Eligibility of CENVAT credit on specific invoices:
The appeal was against an order dropping a demand but confirming an ineligible CENVAT credit demand on specific invoices. The appellant argued that credit for the erection and commissioning of VFD panels in a boiler was valid as per CCR rules and a relevant circular. The Tribunal agreed, allowing the credit of ?13,378 for the VFD panels.

Allegations of contravention of CCR rules:
The appellant had availed CENVAT credit on works contract services post-April 2011, contravening CCR rules. A show-cause notice was issued for disallowing ?92,81,091 of ineligible credit. The Commissioner confirmed a demand of ?3,89,840 and imposed a penalty. However, the Tribunal found the denial of credit unsustainable in law for the VFD panels and ruled in favor of the appellant.

Denial of credit, interest, and penalty imposition:
The appellant reversed ?3,76,462 of credit voluntarily upon receiving the show-cause notice. The appellant argued against the imposition of interest and penalty, stating that the credit was not utilized. The Tribunal, considering the substantial balance in the CENVAT account and the appellant being a state government undertaking, held that allegations of fraud and suppression did not apply. Citing relevant judicial decisions, the Tribunal ruled in favor of the appellant, setting aside the impugned order.

Applicability of judicial precedents on government undertakings:
The appellant argued that as a state government undertaking, allegations of fraud, collusion, and suppression were not applicable. They cited judicial precedents to support their claim. The Tribunal considered the appellant's status and relevant decisions, ultimately allowing the appeal and setting aside the impugned order.