2019 (5) TMI 810 - AT - Central Excise

CENVAT Credit - Capital goods/Inputs - M.S. Plate, M.S. Angle, M.S. Bars, etc., which were used for fabrication of capital goods for use in the factory of the appellant - Revenue is of the view that the appellant has not produced any evidence with regard to use of these items for fabrication of capital goods - HELD THAT - The sole reason to deny cenvat credit is that the steel items on which cenvat credit has been taken by the appellant are neither capital goods or not inputs in terms of Rule 2(k)/2(a) of CCR, 2004 as these items are not used for manufacture of paper and soda ash (the final product), there is no other reason has been stated why these are not capital goods or inputs for fabrication of capital goods - also it has not been alleged in the show cause notice that these items have not been used for fabrication of capital goods. The appellant are entitled to avail cenvat credit on the steel items used in question in terms of Rule 2(k)/2(a) of CCR, 2004 - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of cenvat credit on steel items used for fabrication of capital goods.

Analysis:
The appellant, a manufacturer of writing and printing paper and soda ash, availed cenvat credit on duty paid on various steel items used for fabrication of capital goods. The revenue alleged that the appellant failed to provide evidence of using these items for capital goods fabrication, leading to show cause notices denying cenvat credit and imposing penalties. The appellant contended that they used the steel items for capital goods fabrication, making them eligible for cenvat credit under Rule 2(k)/2(a) of CCR, 2004. The revenue relied on a previous Tribunal decision to deny credit based on the steel items being used for supporting structures embedded to earth. However, the Tribunal found no evidence in the show cause notice to support the denial of credit based on the items not being capital goods or inputs for the final products. Citing a High Court decision overturning the Tribunal's previous ruling, the Tribunal held that the appellant was entitled to cenvat credit on the steel items, setting aside the impugned orders and allowing the appeals with consequential relief.

This judgment revolves around the denial of cenvat credit on steel items used for capital goods fabrication. The revenue's case was based on a Tribunal decision deeming such steel items ineligible for credit, but the Tribunal found the show cause notice lacking in support for this denial. The appellant successfully argued that the steel items were indeed used for capital goods fabrication, making them eligible for cenvat credit under relevant rules. Citing a High Court decision that contradicted the Tribunal's earlier ruling, the Tribunal set aside the impugned orders and allowed the appeals. The judgment highlights the importance of providing clear evidence and legal basis for denying cenvat credit, ensuring that manufacturers can rightfully claim credits for inputs used in production processes.