2022 (5) TMI 797 - AT - Central Excise

CENVAT Credit - inputs - capital goods - input services - main ground for denying the credit is that the Appellant failed to furnish sufficient documentary evidence that the impugned items were used in fabrication of capital goods/accessories/parts/components - HELD THAT - The first and foremost point is when the Chartered Engineer s Certificate was produced before the Adjudicating authority, it was incumbent on the authorities to either contradict the Chartered Engineer s Certificate or accept the same. In the absence of any contradictory Certificates on record holding otherwise that the inputs were used for fabrication of machinery, the non-consideration of the Certificate issued by the Chartered Engineer by the Adjudicating authority seems to be not in consonance with law. Further, receipt of goods and thereafter use for fabrication as per Chartered Engineer s Certificate is not contested, but contested only on a point that the inputs do not fall under the category of capital goods and hence not eligible for Cenvat credit, will not support the case of the Revenue. Since the issue is no more res integra and is decided by the higher Courts, the impugned order is unsustainable and is liable to be set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit on capital goods
2. Consideration of Chartered Engineer's Certificate
3. Documentation and declaration of fabricated capital goods in ER-1 returns
4. Irregular utilization of Cenvat credit on steel items
5. Limitation period for audit discovery
6. Interpretation of capital goods under Cenvat Credit Rules, 2004

Analysis:
1. The case involved the Appellant, a manufacturer of Silico Manganese, availing Cenvat Credit on various items classifiable under Chapter Heading 72 and 73 as capital goods. The dispute arose when a Show Cause Notice alleged that the Appellant availed credit on items not eligible under the definition of capital goods. The Appellant contended they were entitled to the credit, citing a Chartered Engineer's Certificate and proper disclosure in ER-1 returns. The Adjudicating authority confirmed the demand, leading to the Appeal.

2. The Appellant's Advocate argued that the Chartered Engineer's Certificate, detailing the usage of disputed items, was not considered by the authorities. The Certificate indicated the items' usage in the factory, and the Appellant's belief in credit eligibility was emphasized. The failure to address the Certificate's content was highlighted as a flaw in the decision-making process, impacting the Appellant's case significantly.

3. The Department's Authorized Representative countered, claiming irregular utilization of Cenvat credit on steel items for fabrication purposes. The lack of evidence in ER-1 returns declaring fabricated capital goods and the absence of supporting documentation for the materials used in fabrication were key points raised against the Appellant. The discovery of irregular credit utilization during audits was emphasized to support the Department's stance.

4. The Tribunal analyzed the case, noting the Appellant's reliance on the Chartered Engineer's Certificate and the absence of contradictory evidence regarding the items' usage in fabrication. Citing legal precedents, including the Supreme Court's decision in CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd., the Tribunal emphasized the "user test" to determine capital goods eligibility. The Court's decision supported the Appellant's claim, leading to the setting aside of the impugned order and allowing the Appeal with consequential relief.

5. The judgment highlighted the importance of proper documentation, expert certificates, and adherence to legal definitions in determining Cenvat credit eligibility on capital goods. The case underscored the significance of considering all evidence, addressing submissions, and applying legal principles to uphold the rights of the Appellant in availing legitimate credits within the framework of the Cenvat Credit Rules, 2004.