2018 (7) TMI 987 - AT - Central Excise

CENVAT Credit - inputs/capital goods - iron and steel items - whether the iron and steel items (angle, channel, joist, bar plate sheet and coil) can clearly fall under the definition of capital goods and the inputs? - Held that - The Sub Clause (i) of Rule 2a of CCR makes it very clear that any item other than those falling under Chapters 82, 84, 85 and 90 will not be a capital good. Apparently and admittedly the impugned iron and steel items are falling under Chapter 72. For these items to still fall under the aforesaid definition, it is for the appellant to show that these items have been used as components, spares and accessories of the goods falling under the above mentioned Chapters, i.e. 82, 84, 85 & 90 - As is very much apparent from the terminology used, the items are used purely for the construction activity - there is nothing on record as may show that these items have been used in such a structure which is used in or integrally connected with the process of actual manufacture of the final product - credit rightly denied. Penalty - Held that - The Act of the appellant has rightly been held as suppression of relevant facts - Penalty upheld. The iron and steel items do not fall either under the definition of capital goods or under definition of inputs under Section 2(a) and 2(k) of the Cenvat Credit Rules, 2004 - Credit rightly denied - penalty upheld - appeal dismissed - decided in favor of appellant.

Summary

Issues:
Challenge to Commissioner (Appeals) order denying cenvat credit on iron and steel items under Rule 3 Sub-Rule 1 of Cenvat Credit Rules, 2004.

Analysis:
The appellant, engaged in manufacturing sugar and molasses, availed cenvat credit on iron and steel items. The Department denied the credit, stating these items were construction materials not used in manufacturing final products. A Show Cause Notice was issued, confirmed by Assistant Commissioner, and upheld by Commissioner (Appeals), leading to the current appeal. The appellant argued the items were used in manufacturing and cited precedents. The Department argued the items were not capital goods or inputs as per Cenvat Credit Rules. The Tribunal analyzed the definitions of capital goods and inputs under Rule 2 of CCR, 2004. It concluded the iron and steel items did not qualify as capital goods or inputs, as they were used for construction, not integral to the manufacturing process.

The Tribunal found the Circular cited by the appellant inapplicable, as the structures using the items were not integral to the manufacturing process. The reliance on Hindustan Zinc Ltd. case was deemed irrelevant, as no evidence showed the items were integral to the manufacturing process. The Tribunal criticized the appellant for relying on a certificate that did not prove the items' integral use. The penalty imposed on the appellant was upheld under Rule 9(6) of Cenvat Credit Rules, 2004, due to the appellant's misinterpretation leading to suppression of facts. Ultimately, the Tribunal rejected the appeal, confirming the denial of cenvat credit on the iron and steel items.

In conclusion, the Tribunal held that the iron and steel items did not meet the criteria for capital goods or inputs under Cenvat Credit Rules, 2004. The denial of cenvat credit was upheld, as the items were used for construction purposes, not integral to the manufacturing process. The penalty imposed on the appellant was deemed justified. The appeal was rejected, affirming the Commissioner (Appeals) order.