2019 (1) TMI 173 - AT - Central Excise

CENVAT Credit - project imports - concessional rate of duty - Revenue issued the SCN seeking to deny the re-credit availed by the appellant invoking Rule 3(1) of the Cenvat Credit Rules on the ground that the credit was taken without having receipt / possession of the said capital goods - Held that - Similar issue decided in the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS HABASIT IAKOKA (P) LTD. 2011 (2) TMI 1345 - MADRAS HIGH COURT , where it was held that the essential condition for availment of credit as interpreted by various courts is that the capital goods should be used in or in relation to manufacture of the final product and even if the same are used outside the factory for the said purpose the credit cannot be denied so long as the said capital goods are not alienated by the appellant. In the instant case, before availing the cenvat credit the appellant had applied for common registration and it is seen that no response was given by the Revenue on the application for common registration made by the appellant. The said application was neither accepted nor rejected - In these circumstances, it is apparent that the appellant had sought to follow all the requirements of the cenvat credit Rules, before availing the cenvat credit. Credit allowed - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Confirmation of demand of Cenvat Credit.
2. Interest and penalty on the availed Cenvat Credit.
3. Validity of re-credit availed by the appellant.
4. Installation and usage of capital goods for manufacturing.
5. Compliance with registration requirements.
6. Allegations of misrepresentation and suppression by the appellant.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Cenvat Credit:
The appellant, M/s Eimco Elecon India Ltd. (EEL), imported capital goods at a concessional rate of duty and availed Cenvat credit. The capital goods were initially installed at the appellant’s original premises and later shifted to new sheds (C2 and H2) within the MHE Division. The appellant reversed the credit in the original unit and took it in the new registered unit. The Revenue issued a Show Cause Notice (SCN) denying the re-credit in the original unit (AAACE4645CXM001) on the grounds that the capital goods were not in possession of the said unit when the credit was availed.

2. Interest and Penalty on the Availed Cenvat Credit:
The Revenue argued that the appellant had misrepresented and suppressed facts by showing the receipt of capital goods in their records while the goods were cleared outside the factory. It was alleged that the appellant availed credit without installing the machines in the factory premises and utilized the credit during November 2005 to February 2007.

3. Validity of Re-credit Availed by the Appellant:
The appellant contended that the manufacturing process was integrally connected between the original and new premises, and the final products were cleared from the main unit on payment of duty. They argued that the re-credit was justified as the capital goods were used for manufacturing excisable goods. The appellant relied on various judgments, including JSW Ispat Steel Ltd. and Glaxo Smithkline Consumer Health Ltd., to support their claim that Cenvat credit should be interpreted reasonably to avoid the cascading effect of taxation.

4. Installation and Usage of Capital Goods for Manufacturing:
The appellant claimed that the capital goods were used in the manufacturing process, which was essential for the production of final products. They argued that the goods were not disposed of or alienated and were used within the integrated operations of the factory. The appellant had applied for common registration of the new sheds with the main unit, which was neither accepted nor rejected by the Revenue.

5. Compliance with Registration Requirements:
The appellant sought common registration for the new sheds (C2 and H2) with the main unit, which was necessary for availing Cenvat credit. The application for common registration was made before availing the credit, but the Revenue did not respond. The appellant later obtained separate registration for the new sheds and adjusted the Cenvat credit accordingly.

6. Allegations of Misrepresentation and Suppression by the Appellant:
The Revenue alleged that the appellant misrepresented facts by recording the receipt of capital goods in their records while the goods were cleared outside the factory. The appellant argued that they had followed all legal provisions and informed the Revenue about the credit adjustments. They contended that the credit was availed in good faith and based on the integrated manufacturing process.

Judgment:
The Tribunal referred to various judicial precedents, including the cases of Habasit Iakoka, Pooja Forge Ltd., and Mileen Engineers, which established that capital goods used in or in relation to the manufacture of final products are eligible for Cenvat credit, even if used outside the factory premises, provided they are not alienated. The Tribunal found that the appellant had applied for common registration and followed the requirements of the Cenvat Credit Rules before availing the credit. The Tribunal concluded that the appellant was entitled to the Cenvat credit and set aside the impugned order, allowing the appeal with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief. The judgment emphasized that the essential condition for availing Cenvat credit is the usage of capital goods in the manufacturing process, and compliance with procedural requirements should be interpreted reasonably to avoid the cascading effect of taxation.

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