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2020 (1) TMI 539 - AT - Central ExciseCENVAT Credit - capital goods - ingot moulds - period April 2000 to March 2002 and May to June 2002 - Circular of CBEC dated May 5, 2000 - HELD THAT - There is no restriction that in the event a particular goods is a capital goods , they cannot be components or spares or accessories of the goods specified in subclause (i) of Rule 57AA(a)/Rule 2(b) of the 1944 Rules and the Cenvat Credit Rules respectively. In the absence of any such restriction in the statutory provisions, the conclusion would be that either as components or accessories of goods falling under clause (i) of the aforesaid Rules or independently under clause (ii) thereof, moulds, dies, tubes and fittings would be treated as capital goods for the purpose of availment of cenvat credit - It therefore follows that when such moulds, dies, tubes and pipes are used as components and accessories of goods specified under clause (i) of the said Rules, the exception as provided in Rule 4(2)(b) of the Cenvat Credit Rules, 2001/Rule 57AC(2)(b) of the 1944 Rules from the said goods being required to be in possession and use of the manufacturer of final products in the subsequent year, would be available and cenvat credit of the duty paid thereon can be availed even without satisfying such requirement. The capital goods as defined in Rule 57AA(a)(ii) of 1944 Rules/Rule 2(b)(ii) of the Cenvat Credit Rules, 2001 can be both used in an independent manner by itself as well as an accessory of another capital goods covered under clause (i) of both the said Rules and that the ingot moulds, in the instant case, on an application of the principles laid down in various decisions, is an accessory of the LD Converter, which undisputedly is capital goods under clause (i) of the said Rules - reliance can be placed in the case of BANCO PRODUCTS (INDIA) LTD. VERSUS COMMISSIONER OF C. EX., VADODARA-I 2009 (2) TMI 101 - CESTAT AHMEDABAD and PRECISION RUBBER INDUSTRIES VERSUS COLLECTOR OF CENTRAL EXCISE 1990 (3) TMI 76 - HIGH COURT OF JUDICATURE AT BOMBAY . The TSL had correctly availed cenvat credit of the balance 50% of the duty paid on the ingot moulds in the subsequent years - demand in respect of cenvat credit on ingot moulds are therefore unsustainable - also, TSL had correctly availed cenvat credit on the said welding wires and rods amounting to ₹ 2.48 lakhs. Demand set aside - penalty set aside - appeal disposed off.
Issues Involved:
1. Eligibility of Cenvat credit on ingot moulds as capital goods. 2. Eligibility of Cenvat credit on other items listed in Annexure-1 of the show cause notice. 3. Validity of the penalty imposed on TSL. Detailed Analysis: 1. Eligibility of Cenvat Credit on Ingot Moulds as Capital Goods: The primary issue in both appeals was whether Tata Steel Limited (TSL) could avail Cenvat credit on ingot moulds under the Cenvat Credit Rules during the relevant periods. The Revenue contended that TSL was not eligible for the balance 50% of the duty paid on ingot moulds in the subsequent year as they were not in TSL’s possession. TSL argued that ingot moulds were "accessories" of the LD Converter, a capital goods specified under Rule 2(b) of the Cenvat Credit Rules, 2001 and Rule 57Q of the erstwhile Central Excise Rules, 1944. They maintained that the credit availed was valid and in accordance with the provisions. The Tribunal referred to the definitions and rules under the Central Excise Rules, 1944 and the Cenvat Credit Rules, 2001/2002, particularly focusing on Rule 57AA(a) and Rule 57AC(2)(b) of the 1944 Rules and Rule 2(b) and Rule 4(2)(b) of the Cenvat Credit Rules, 2001/2002. The Tribunal also considered various judicial precedents and technical literature which established that ingot moulds are essential accessories in steel making. Consequently, the Tribunal held that TSL had correctly availed Cenvat credit of the balance 50% of the duty paid on ingot moulds in the subsequent years, even if the moulds were not in possession. 2. Eligibility of Cenvat Credit on Other Items Listed in Annexure-1: TSL contested the denial of Cenvat credit on several other items listed in Annexure-1 of the show cause notice. They argued that these items were used in or in relation to the manufacture of final products, and thus eligible for Cenvat credit. The Tribunal considered the detailed submissions and technical literature provided by TSL, which demonstrated the use of these items in the manufacturing process. For instance, the Tribunal found that the Distributed Control System (DCS) was used in connection with the production of steel, and thus, credit on the same was available. Similarly, electrodes used for welding rolls in the slab caster were considered components of capital goods, making them eligible for credit. The Tribunal also addressed the issue of welding wires and rods, citing various judicial precedents which supported TSL's claim that these were eligible for Cenvat credit when used for repair and maintenance of plant and machinery. 3. Validity of the Penalty Imposed on TSL: The Tribunal examined whether the imposition of a penalty of ?5 lakhs on TSL was justified. Considering that TSL had not contravened any provisions of the Cenvat Credit Rules and had correctly availed Cenvat credit, the Tribunal found the penalty to be untenable and unsustainable. Therefore, the penalty was set aside. Conclusion: The Tribunal upheld the order dated December 16, 2008, passed by the Commissioner (Appeals), Central Excise, Ranchi, in favor of TSL, rejecting the Revenue's appeal. It also partially allowed TSL's appeal against the order dated March 26, 2014, passed by the Commissioner of Central Excise & Service Tax, Jamshedpur, setting aside the majority of the demand and the penalty imposed. The appeals were disposed of accordingly.
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