2018 (5) TMI 464 - AT - Central Excise

CENVAT credit - inputs - Plates, Shape & Section, MS Angles, GP Sheet, HR Coil, CR step, MS Channels, Paints, Welding Electrodes etc. - Held that - the appellants had led evidence before the Courts below that the items in question like Welding Electrodes, MS electrodes, MS plate, Shape and Section etc have been utilised for fabrication of mostly Capital Goods - the definition of inputs in Rule-2 (k) read with Explanation-2 provides input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer - credit allowed. Penalty - Held that - Since, the Cenvat credit on items in question is admissible neither the penalty on appellant company nor on Managing Director is maintainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Entitlement to Cenvat credit on various items used in the manufacture of capital goods
- Imposition of personal penalty on Managing Director

Entitlement to Cenvat Credit:
The appellants, a manufacturer of V.P. sugar and molasses, filed appeals against Orders-in-Original passed by the Commissioner of Central Excise & Customs, Meerut-II. The main issue was whether the appellants were entitled to Cenvat credit on items like Plates, Shape & Section, MS Angles, GP Sheet, HR Coil, CR step, MS Channels, Paints, Welding Electrodes, etc., used as inputs in the manufacture of capital goods further utilized in the production of Excisable goods. Additionally, the appeals also involved the imposition of personal penalties on the Managing Director. The Revenue objected to the Cenvat credit claiming that certain items did not fall under the specified chapter heading mentioned in the Cenvat Credit Rules, 2004. The appellants contended that they maintained records of item usage and argued for the admissibility of the Cenvat credit.

Legal Arguments and Precedents:
The appellants argued that the items in question, like Iron & Steel, were used in fabrication and installation of plant and machinery, making them eligible for Cenvat credit. They cited previous judgments and Final Orders in similar cases where Cenvat credit was allowed. The Counsel highlighted that Cenvat credit is available even on supporting structures essential for heavy machinery used in manufacturing Excisable goods. The Counsel also discussed the retrospective effect of Rule amendments and prayed for the appeals to be allowed.

Judgment and Analysis:
After considering the arguments, the Tribunal found that the appellants provided evidence that the disputed items were used in fabrication of capital goods. The definition of inputs under Rule-2(k) allowed Cenvat credit on goods used in the manufacture of capital goods further used in the factory of the manufacturer. The Tribunal referenced the specific provision for allowing Cenvat credit on inputs indirectly used in the manufacture of final products or for further capital goods used in the factory of production. Based on the evidence and legal provisions, the Tribunal held that the appellants were entitled to Cenvat credit on the items in question. Consequently, the penalties imposed on the appellant company and the Managing Director were deemed not maintainable. The appeals were allowed, and the impugned order was set aside, granting the appellants consequential benefits as per the law.