2018 (1) TMI 358 - AT - Central Excise

CENVAT credit - MS Angle, channel, bars etc used for maintenance of capital goods and for the structural which support the capital goods - Held that - the appellants are not challenging the cenvat credit in respect of material used for erection and repair of structural - Insofar as the material used for the maintenance and repair and fabrication of parts accessories of the capital goods is concerned, the same cannot be denied as it squarely falls within the definition of Rule 2(K) of CCR 2004 - the demand of duty in respect of structural is upheld. Penalty - Rule 15(2) of Cenvat Credit Rules 2004 read with Section 11AC of the Act - Held that - It is seen that the structural have been specifically kept within the definition of capital goods in the Cenvat Credit Rules. Thus in so far as cenvat credit taken in respect of structural is concerned there was no question of doubt - Penalty is consequently revised to the same level. Appeal allowed in part.

Summary

Issues:
Denial of cenvat credit on materials used for maintenance of capital goods and structural support.

Analysis:
The appellant, Shri Chhatrapati SSK Ltd., filed an appeal against the denial of cenvat credit on materials like MS Angle, channel, bars used for maintenance of capital goods and structural support. The appellant argued that while part of the goods were used for maintenance of capital goods, another part was utilized for construction or maintenance of structural elements. The appellant had already reversed the cenvat credit for structural materials, which the lower authorities had acknowledged. The appellant contended that they were entitled to cenvat credit for materials used in the maintenance of capital goods. The appellant distinguished the decision of the Hon'ble High Court in a specific case by citing precedents from the Tribunal where cenvat credit had been allowed for similar cases after examining Rule 2K of the Cenvat Credit Rules 2004. Rule 2K includes goods used in manufacturing capital goods further used in the original manufacturer's factory.

The Assistant Commissioner (AR) relied on the impugned order and the decision of the Hon'ble High Court in a particular case. Upon reviewing the arguments, the tribunal found that the appellant did not challenge the cenvat credit for materials used in the erection and repair of structural elements. Regarding materials used for maintenance, repair, and fabrication of parts and accessories of capital goods, the tribunal ruled that such credit cannot be denied as it falls within the definition of Rule 2(K) of the Cenvat Credit Rules 2004.

The appellant also contested the penalty imposed under Rule 15(2) of the Cenvat Credit Rules 2004 along with Section 11AC of the Act. The appellant argued that this penalty was a matter of interpretation and should not have been imposed. The tribunal noted that structural elements were explicitly defined as capital goods in the Cenvat Credit Rules, leaving no room for doubt regarding the cenvat credit taken for them. Consequently, the demand for duty concerning structural elements was upheld, and the penalty was adjusted accordingly. The appeal was partly allowed based on the above terms.

This judgment, pronounced on 29/11/2017, addressed the denial of cenvat credit on materials used for maintenance of capital goods and structural support, emphasizing the distinction between materials used for maintenance versus construction or repair of structural elements and upholding the entitlement to cenvat credit as per the relevant rules and precedents.