2023 (6) TMI 141 - AT - Central Excise

CENVAT Credit - inputs or capital goods or used for the manufacture of the final product - steel items such as Plate, Angles, Beam, Channels Rounds during the period 2008-09 to 2010-11 - HELD THAT - From the factual verification done by the jurisdictional it is quite evident that appellant is not even claiming the Cenvat credit in respect of these goods as capital goods. These goods were used as input for manufacture and supply of the finished goods. In view of the fact, entire proceedings initiated against the appellant for denial of CENVAT credit treating these as Capital Goods are ill founded and cannot be sustained. Appeal is allowed in view of the factual verification report filed.

Summary

Issues Involved:
1. Admissibility of Cenvat Credit on steel items (M.S. Angles, M.S. Beams, M.S. Rounds, M.S. Plates) as inputs or capital goods.
2. Compliance with the definitions of inputs and capital goods under CENVAT Credit Rules, 2004.
3. Legitimacy of the penalty imposed u/s 11AC of the Central Excise Act, 1944.

Summary:

Issue 1: Admissibility of Cenvat Credit on Steel Items
The appellant, a manufacturer of refractory materials, took Cenvat credit of Rs. 75,908/- on steel items during 2008-09 to 2010-11. The Revenue contended these items do not qualify as inputs or capital goods for manufacturing the final product, leading to a show cause notice dated 05.04.2013 to recover the inadmissible Cenvat Credit and impose a penalty u/s 11AC.

Issue 2: Compliance with Definitions under CENVAT Credit Rules, 2004
The matter was initially adjudicated and confirmed by the lower authorities. However, CESTAT remanded the case back to the original authority to examine whether the steel items used for fabricating structures qualify as inputs or capital goods per Rule 2(k) of the CENVAT Credit Rules, 2004. Upon remand, the adjudicating authority disallowed the Cenvat credit, confirmed the demand, and imposed a penalty, which was upheld by the Commissioner (Appeal).

Issue 3: Legitimacy of Penalty Imposed u/s 11AC
The factual verification report indicated that the steel items were used for manufacturing precast shapes, central blocks, and end blocks with metallic frames, which are integral to the final product and cannot be separated. Therefore, these steel items qualify as inputs for manufacturing finished goods and not as capital goods. The impugned order's reliance on various judgments and definitions was found misplaced as the appellant did not claim these items as capital goods.

Conclusion:
The appeal was allowed based on the factual verification report confirming the use of steel items as inputs in manufacturing finished goods. The proceedings for denying CENVAT credit treating these items as capital goods were deemed ill-founded and unsustainable. The penalty imposed u/s 11AC was consequently invalidated.