2018 (12) TMI 1023 - AT - Central Excise

CENVAT Credit - capital goods - HS wagon - period of May, 2006 - Held that - The capital goods has been defined under Rule 2(a)(A) of Cenvat Credit Rules, 2004, where certain goods have been specified by classification as well as by the description and such goods are required to be used in the factory of production of the final product. From the perusal of the definition of the capital goods , it is evident that the box HS wagon is classifiable under Chapter Heading 860692.90 which is not excluded from the definition of capital goods . The box HS wagon are being used for procurement of inputs as well as dispatch of output product from their factory. Going by the definition of the capital goods as extracted above, it can be seen that there is no bar on the use of the product as a capital goods, merely that the appellant has reversed the cenvat credit and interest thereon will not deprive from the substantive right for availing cenvat credit within Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Availment of Cenvat credit on capital goods

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise regarding the availment of Cenvat credit on wagons for a specific period. The appellant, engaged in manufacturing various products falling under Chapter 72 of the Central Excise Tariff Act, had availed Cenvat credit on 51 box HS wagons. The Revenue contended that the wagons were not used in relation to the manufacture of finished goods, leading to a demand for reversal of wrongly availed credit and imposition of penalties. The appellant reversed the credit before the show cause notice and paid applicable interest. The Revenue insisted on the penalty, while the appellant argued that the penalty was not imposable as the duty had been deposited before the notice was issued. The Tribunal referred to previous decisions and ruled that the penalty was not justified in this case.

The main issue revolved around the classification of box HS wagons as capital goods for Cenvat credit purposes. The Cenvat Credit Rules define capital goods under Rule 2(a)(A), listing specific goods required to be used in the factory of production of the final product. The appellant argued that the wagons were procured for transporting inputs and outputs, thus fulfilling the criteria for capital goods. Despite initially reversing the credit, the appellant's use of the wagons for production purposes was deemed valid. The Tribunal found no impediment to availing Cenvat credit on the wagons and set aside the penalty imposed by the Revenue. The decision was based on the interpretation of the Cenvat Credit Rules and the actual usage of the wagons in the manufacturing process.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and providing consequential relief. The judgment highlighted the importance of correctly interpreting the definition of capital goods under the Cenvat Credit Rules and considering the actual usage of the goods in the manufacturing process. The decision emphasized that the reversal of credit and payment of interest did not negate the appellant's right to avail Cenvat credit on the wagons used for production purposes.