2018 (7) TMI 161 - AT - Central Excise

CENVAT credit - inputs - cement, angles, TMT bars, etc - Held that - The impugned order has relied upon the judgment of the Tribunal in the case of Vandana Global Ltd. 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) in holding that the definition of inputs does not include cement, angles, TMT bars, etc. However, this judgment of the Tribunal has been disapproved by the Hon ble Calcutta High Court in the case of Surya Alloy Industries Ltd. v. Union of India 2014 (9) TMI 406 - CALCUTTA HIGH COURT - credit cannot be denied. Further, the Chartered Engineer s certificate reflects that the impugned goods were actually used during the manufacture of the final products - the usage of various iron and steel items is to be analysed in light of the decision of the Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA . Shortage of finished goods detected during the stock verification - Held that - There is no force in the submission of the ld. Advocate, as it was not substantiated by any evidence. The demand of duty is required to be upheld. Appeal allowed in part.

Summary

Issues:
1. Shortage of finished goods during stock verification
2. Disallowance of Cenvat Credit on capital goods
3. Appeal against demand of Central Excise Duty and penalty

Analysis:
1. The case involved a shortage of finished goods of non-alloy steel ingots during a stock verification at the factory premise of the appellant. The officers found a shortage of 31.705 MT and recorded statements from the authorized signatory and the Director accepting the shortage. The adjudicating authority confirmed the demand of duty along with interest and imposed penalties. The Commissioner (Appeals) upheld the order, leading to the appeal before the Tribunal.

2. The appellant had taken credit on various iron and steel items like MS Angle, joist, channel, beam, TMT bars, considering them as capital goods. A Show Cause Notice was issued proposing demand of Central Excise Duty and disallowance of Cenvat Credit. The appellant argued that the goods were eligible for credit and that all payments during the investigation were made under protest. The Tribunal referred to the judgment in the case of Vandana Global Ltd. and the subsequent disapproval by the Hon’ble Calcutta High Court in the case of Surya Alloy Industries Ltd., allowing credit on the impugned goods.

3. The Tribunal analyzed the usage of the iron and steel items in light of the decision of the Hon’ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. The usage was assessed based on the ‘user test’ outlined in the case of CCE, Coimbatore v. Jawahar Mills Ltd. The Tribunal upheld the demand of Central Excise Duty that had already been paid by the appellant but set aside the demand of Cenvat Credit and penalty under section 11AC of the Act. It was noted that there was no evidence of fraud, collusion, or wilful misstatement to evade payment of duty, leading to the appeal being allowed on specific terms.