2022 (10) TMI 7 - AT - Central Excise

CENVAT Credit - capital goods - Welding Electrodes - case of appellant is that welding electrodes are used for fabricating Steel Formers (size Diameter 1100mm Height 2350mm with 16mm rods as Spiders inside) which are consumed in its induction furnace - levy of penalty - HELD THAT - In view of the decision of the Hon ble Calcutta High Court in CCE., KOLKATA-IV VERSUS HINDUSTAN ENGINEERING INDUSTRIES LTD. 2010 (12) TMI 393 - CALCUTTA HIGH COURT , which is the jurisdictional High Court of this Bench, and particularly in the absence of any contrary decision holding the field, the issue regarding admissibility of Cenvat Credit on Welding Electrodes has to be decided in favour of the appellant, as the same being no longer res integra. Levy of penalty - HELD THAT - In light of the undisputed fact that the Appellant was regularly filing the periodic statutory Returns disclosing therein the factum of availment of credit as impugned herein, to the satisfaction of the jurisdictional Authorities, the demand in the present case is barred by limitation and therefore, the penalty on the Appellant is not imposable under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Act. Also, the Show Cause Notice in the present case having been issued purely on the basis of the AG Audit objection, without any independent investigation, is not sustainable in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Cenvat credit on welding electrodes - Eligibility and admissibility.

Analysis:
The Appellant, engaged in the manufacture of sponge iron and MS billet, faced an objection regarding the availment of Cenvat Credit on welding electrodes amounting to Rs.28,522/- as capital goods. The objection was based on a Tribunal decision and upheld by the Hon'ble Supreme Court. The jurisdictional range Superintendent demanded repayment and imposed penalties. The Appellant contended that welding electrodes were used in the manufacturing process of their final product, justifying Cenvat credit. A Show Cause Notice was issued, and the demand was confirmed by the Adjudicating authority and First Appellate authority, leading to the present Appeal before the Tribunal.

Upon hearing both sides and examining the records, it was found that the objection was raised based on a Tribunal decision and Supreme Court dismissal of an appeal against it. The Appellant cited a subsequent High Court decision overruling the earlier Tribunal decision, allowing Cenvat credit on welding electrodes for repairs and maintenance of plant and machinery. The Appellant also highlighted various conflicting decisions by different Benches of the Tribunal until 2008, creating ambiguity on the admissibility of Cenvat credit on welding electrodes.

The Tribunal noted a series of legal developments, including a Supreme Court reference to a Larger Bench on the interpretation of the term "includes" in the definition of 'Input'. High Court decisions overturning Tribunal decisions further added to the complexity of the issue. In light of the jurisdictional High Court's decision and absence of any contrary ruling, the Tribunal ruled in favor of the Appellant regarding the admissibility of Cenvat Credit on welding electrodes. Additionally, the demand was considered time-barred due to the Appellant's regular disclosure in statutory Returns, making the penalty imposition unjustified. The Tribunal also criticized the Show Cause Notice for lacking independent investigation, rendering it legally unsustainable.

Ultimately, the impugned orders were set aside, and the Appellant's Appeal was allowed with consequential relief. The judgment emphasized the importance of legal precedents, jurisdictional decisions, and statutory compliance in determining the eligibility and admissibility of Cenvat credit, providing clarity on a contentious issue in indirect taxation.