2022 (9) TMI 850 - AT - Central Excise

Reversal of CENVAT Credit on inputs and input services - erection and commissioning services - input services used for setting up of factory - dumpers used for transportation of ore from captive mines to the plant - falling under Chapter 87 and thus, excluded from the definition of the term capital goods under Rule 2(a)(A) of CCR or not - welding electrodes and MS Rolla Deck Sheet used for fabrication-erection and for repairs of machinery. CENVAT Credit - input services used for setting up of the factory - HELD THAT - This issue is already settled in favour of the appellant by a co-ordinate bench of this Tribunal in BHARATHI CEMENT CORPORATION PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX AND (VICE-VERSA) 2017 (7) TMI 679 - CESTAT HYDERABAD , where it was held that the services, in question, used for setting up of factory have to be treated as input service and would be eligible for Cenvat credit, as the factory has been setup for manufacture of final products which are liable to Central Excise duty. Therefore denial of Cenvat credit, in question, is contrary to the provisions of Rule 2(l) of Cenvat Credit Rules, 2004. CENVAT credit on dumpers - HELD THAT - These are part of the material handling system, as such dumpers are used by the appellant for transfering the raw material (limestone) from the pit head to the crusher. The issue stands covered in favour of the appellant by Precedent order of this Tribunal in M/S. ADITYA CEMENT VERSUS CCE, JAIPUR-II 2016 (9) TMI 1127 - CESTAT NEW DELHI , where it was held that dumpers are material handling equipments used for transportation of limestone from mining area to the crusher which is further used for the manufacture of cement; therefore, the dumpers are to be treated as used in or in relation to the manufacture of final products and thus, qualifies as an input . Availment of cenvat credit - Capital goods - welding electrodes - welding machine - MS rolla dalk profile sheet - HELD THAT - The CENVAT credit on these items is allowable as inputs under Rule 2(k) as without the use of welding electrodes and welding machine no fabrication and repair and maintenance of plant and machinery is possible. In absence of such inputs, production of dutiable output is not possible. Thus, there is indirect use of these items in the manufacture of dutiable output. Similarly, the profile sheets are also required for use in fabrication of plant and machinery, for setting up of the factory. Thus the credit is available. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of reversal of cenvat credit on inputs and input services, denial of credit on dumpers, denial of credit on welding electrodes, welding machines, and MS Rolla Deck Profile sheets, imposition of penalty equal to duty.

Analysis:

1. Reversal of Cenvat Credit on Inputs and Input Services:
The appeal challenged the demand for reversal of cenvat credit availed by the appellant on inputs and input services during a specific period. The grounds for the demand included incorrect availment of credit on input services used during the construction of the factory, denial of credit on dumpers for ore transportation, and denial of credit on welding electrodes and MS Rolla Deck Sheet. The appellant argued that similar demands were dropped by the respondent authority in identical cases for periods before and after the subject appeal period. Legal precedents and tribunal orders supported the appellant's position, establishing that credit on input services for setting up a factory is permissible.

2. Denial of Credit on Dumpers:
The denial of cenvat credit on dumpers was based on their classification under Chapter 87, excluding them from the definition of 'capital goods.' However, the appellant contended that dumpers are crucial components of the material handling system, directly linked to the manufacturing process. Legal precedents and tribunal decisions supported the appellant's stance, emphasizing the use of dumpers in manufacturing activities. The Tribunal found in favor of the appellant, citing relevant legal principles and precedents.

3. Denial of Credit on Welding Electrodes, Welding Machines, and MS Rolla Deck Profile Sheets:
The denial of credit on welding electrodes, welding machines, and MS Rolla Deck Profile sheets was disputed by the appellant. These items were deemed essential for fabrication, repairs, and maintenance of plant machinery, facilitating smooth manufacturing operations. Legal precedents and tribunal decisions highlighted the admissibility of cenvat credit on such items due to their direct contribution to manufacturing activities. The Tribunal ruled in favor of the appellant, recognizing the significance of these items in the manufacturing process.

4. Imposition of Penalty Equal to Duty:
The appellant contested the imposition of a penalty equal to the duty demanded, especially in a case involving a difference in the interpretation of legal provisions. Citing relevant decisions, the appellant argued against the penalty imposition within the normal period of limitation. Legal precedents and tribunal rulings supported the appellant's position, emphasizing the need for a balanced approach in penalty imposition for cases involving legal interpretation discrepancies. The Tribunal considered these arguments and ruled in favor of the appellant, setting aside the impugned order.

In conclusion, the Appellate Tribunal CESTAT Hyderabad, comprising Mr. Anil Choudhary and Mr. P.V. Subba Rao, allowed the appeal, overturning the demand for reversal of cenvat credit and denying credit on dumpers, welding electrodes, welding machines, and MS Rolla Deck Profile sheets. The Tribunal emphasized legal precedents and established principles to support its decision, granting the appellant consequential benefits in accordance with the law.