2018 (4) TMI 1080 - AT - Central Excise

CENVAT credit - inputs/capital goods - Shape section/MS Angle/Channel/Girder/plate (7208/7216), M.S. Column, H.R. Coils, H.R. Cobbler Plates, CR Sheets, Steel Bars, M.S. Bar, etc - Held that - the items in dispute are either components of capital goods or inputs which have been used in manufacture of capital goods, which are further used in the factory of the appellant for manufacture of dutiable goods like sugar and molasses etc. - the appellant is entitled to CENVAT Credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Allowability of Cenvat Credit on various items like Shape section/MS Angle/Channel/Girder/plate, M.S. Column, H.R. Coils, H.R. Cobbler Plates, CR Sheets, Steel Bars, M.S. Bar, etc.

Analysis:

The appellant, a sugar factory engaged in the manufacture of Sugar, Molasses, and Chemicals, availed Cenvat Credit on inputs and capital goods. Show cause notices were issued objecting to the Cenvat Credit taken on items like M.S. Column, H.R. Coils, HR SS Plates, etc., during April 2008, amounting to ?15,42,426, with further interest and penalty proposed. The Assistant Commissioner adjudicated the matter, allowing credit of ?60,798 on certain items but disallowing credit on others, imposing penalties under Rule 15 of CCR. The penalty was also imposed on the employee under Rule 26 of Central Excise Rule, 2002.

The appellant appealed to the learned Commissioner (Appeals), who partially allowed the appeal, setting aside the penalty on the company but upholding the penalty on the employee. The appellant and the employee then approached the Tribunal, arguing factual errors in the order and providing specific use cases for the disputed items, highlighting their use in various machinery fabrication processes.

The appellant's counsel explained the utilization of disputed items in fabricating components like cooling towers, DM plant tanks, HCL tanks, cable clamps, base and supporting structures of pumps and motors, base frames of boilers, and bagasse handling systems. The counsel relied on the Explanation to Rule 2(k) of CCR and the definition of Capital Goods in Rule 2(a) to support the correctness of the credit taken.

After considering the arguments, the Tribunal found that the disputed items were components of capital goods or inputs used in manufacturing capital goods further utilized in the factory for producing dutiable goods like sugar and molasses. Consequently, the Tribunal held that the appellant was entitled to Cenvat Credit on the items in dispute, allowing the appeals and setting aside the penalties imposed on both the company and the employee.

In conclusion, the Tribunal ruled in favor of the appellant, allowing Cenvat Credit on the disputed items and overturning the penalties imposed by the Assistant Commissioner.