2018 (3) TMI 62 - AT - Central Excise

Recovery of Excise Duty - parts of transformers, cleared under returnable gate passes, but not returned to the factory - Held that - it is prudent to remand the matter to the adjudicating authority to ascertain the fact whether the items cleared under returnable gate passes and not returned to the factory being used for replacement of worn out pats, are either manufactured by the appellant or credit has been availed on the same. CENVAT credit - input services - Erectioning and Commissioning charges - clearing and forwarding charges - Held that - the issue is covered in Alidhara Textile Engg. Pvt. Ltd. s case 2009 (1) TMI 129 - CESTAT AHMEDABAD and Clearing and Forwarding service is covered by the judgment of Hon ble High Court in the Inductotherm Ltd. s case 2014 (3) TMI 921 - GUJARAT HIGH COURT - in these cases the services has been held to be input services - credit on both items allowed. Penalty on the Director - Held that - the Ld. Advocate submits that no statements has been recorded by the department from him, hrnvr his involvement has not been established, consequently no personal penalty is imposable on him. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Excise duty demand on parts of transformers not returned to the factory.
2. Cenvat credit demand on input services - Erectioning and Commissioning charges and clearing and forwarding charges.

Analysis:

Issue 1: Excise duty demand on parts of transformers not returned to the factory
The appellant, engaged in transformer manufacturing, faced a demand for excise duty on parts of transformers not returned to the factory. The appellant contended that spare parts sent to customers for replacement against returnable gate passes, if not returned, are sent back to the factory and duly recorded. The appellant argued that these parts were bought-out items on which no Cenvat credit was availed, and excise duty was paid as insisted by officers. The Tribunal found that the appellant paid excise duty on parts cleared for replacement, claiming these items were neither manufactured by them nor had Cenvat credit availed. The matter was remanded to ascertain if the items not returned to the factory were used for replacement and if credit was availed on them.

Issue 2: Cenvat credit demand on input services
Regarding Cenvat credit on erection and commissioning charges, the appellant contended that service tax paid on supervision charges during transformer installation was admissible as input service. The appellant cited a tribunal decision to support this argument. Additionally, the appellant argued that service tax paid on clearing and forwarding charges for imported inputs was creditable, referring to a High Court judgment. The Tribunal acknowledged the precedents cited by the appellant, supporting the admissibility of Cenvat credit on these input services.

Conclusion
The Tribunal allowed the appeal by remanding the matter for further investigation on the excise duty demand issue. The appellant's arguments regarding the admissibility of Cenvat credit on input services were accepted based on relevant legal precedents. The penalty on the director was deemed unsustainable due to lack of evidence and involvement. As a result, the appeals were disposed of in favor of the appellant.