2019 (5) TMI 1346 - AT - Central Excise

CENVAT Credit - capital goods - plates, angles, beam, bars, etc. falling under chapter 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985 - whether a support provided to a roof is intended to be covered by the term civil structure ? - HELD THAT - Civil structure is primarily used to house either people or goods or equipments. The roofing in a mine, on the other hand, offers protection from the possibility of mud shifting in the area that has been drilled. It, therefore, hardly conforms to the expression civil structure . Moreover, such roofing and stitching in underground mines is a statutory requirement, and the adjudicating authority, while acknowledging it to be so, has disregarded the undeniable essentiality by mere reference to definitions. It has been held judicially that any statutorily mandated activity is essential for manufacture and hence, the product inputs/input service are eligible for availment of CENVAT credit. Accordingly, the denial of CENVAT credit for roofing and roof support and roof stitching has no basis in law. The matter remanded back to the original authority for a fresh ascertainment of the entitlement to the extent permissible - appeal allowed by way of remand.

Summary

Issues: Denial of CENVAT credit on duties paid for 'plates, angles, beam, bars, etc.' under chapter 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985; Interpretation of the definition of 'capital goods' and 'inputs' under rule 2(a) and 2(k) of CENVAT Credit Rules, 2004; Imposition of penalties under rule 15(1) and rule 15(2) of CENVAT Credit Rules, 2004 read with section 11AC of Central Excise Act, 1944.

Analysis:

1. The appeal challenges the denial of CENVAT credit on duties paid for specific items under chapters 72 and 73 of the Central Excise Tariff Act, 1985. The impugned order confirmed a substantial demand under rule 14 of CENVAT Credit Rules, 2004, and imposed penalties under relevant provisions.

2. The appellant argued that the inputs were used for maintenance/repair and in the manufacture of capital goods like conveyor systems, essential for coal mining operations. Citing precedent, the appellant contended that inputs may be utilized in final products or capital goods. The appellant emphasized that all inputs were crucial for coal mining activities, warranting CENVAT credit.

3. The Authorized Representative countered, highlighting that the inputs did not qualify as 'capital goods' under rule 2(a) and that certain uses, like retaining mine structures, fell under exclusions in rule 2(k) of the CENVAT Credit Rules, 2004.

4. Upon review, it was found that the adjudicating authority had rejected the appellant's claims due to insufficient details on input utilization for maintenance/repair and capital goods manufacture. The lack of specific information hampered a clear determination of CENVAT credit eligibility.

5. The majority of the demand related to inputs used for roof support, stitching, and equipment fabrication. The impugned order disallowed credit based on technical interpretations, including the exclusion of goods used for construction of civil structures. However, the Tribunal disagreed, noting the functional necessity of items like fabricated poles and base plates for supporting capital goods.

6. The Tribunal questioned the characterization of roof support as a 'civil structure,' emphasizing its essential role in preventing mud shifts in mines. Statutory mandates for such activities were deemed crucial for manufacturing, thus warranting CENVAT credit eligibility. Consequently, the denial of credit for roofing activities lacked legal basis.

7. Given the above findings, the Tribunal set aside the impugned order and remanded the matter for a fresh assessment in line with the Tribunal's interpretation, emphasizing the importance of functionality in determining CENVAT credit eligibility.

This comprehensive analysis delves into the issues surrounding the denial of CENVAT credit on specific inputs, the interpretation of relevant rules, and the legal basis for imposing penalties. The Tribunal's detailed examination and nuanced conclusions provide clarity on the eligibility criteria for CENVAT credit in the context of manufacturing operations.