2023 (7) TMI 764 - AT - Central Excise

Disallowance of CENVAT credit wrongly utilized - capital goods - G.P. Coils - G.P. Sheets - HR Coils - C.R. Sheet - M.S. Angle - M.S. Plates - M.S. Channel - Shape and Section - Alloyed/Unalloyed cold Rolled Coil Throughed Corrugated C R Sheet - and Primer Pains - recovery alongwith interest and penalty - Order beyond the scope of the Show Cause Notice (SCN) - HELD THAT - The panchnama prepared by the panchas who had been called by the Central Excise Officers to witness the verification of inputs used in the manufacture of capital goods , also gives details of the verification that was conducted to establish that the parts were used in the machines for fabrication work. The panchnama also records that the Officers were provided photocopies of relevant purchase invoices along with store issue slips of material duly signed by the concerned technical authority - It is, therefore, clear that the materials on which CENVAT credit had been taken had all been used for fabrication work of machines which are capital goods. In any view of the matter the show cause notices do not allege that the raw materials on which CENVAT credit had been taken had not been utilized for fabrication of capital goods . The Commissioner, therefore, could not have examined this issue - It is, therefore, not possible to sustain the finding recorded by the Commissioner that the items in question have not been used for fabrication of capital goods . Penalty - HELD THAT - The imposition of penalty upon the Gautam Goel cannot also be sustained. Even otherwise, the learned counsel for the appellant is justified in asserting that there was no evidence on record to suggest that he was involved in the day to day affairs of the appellant, particularly with regard to availment of CENVAT Credit. Appeal allowed.

Summary

Issues Involved:
1. Denial of CENVAT credit on certain items.
2. Imposition of penalty on the Managing Director.

Summary:

Issue 1: Denial of CENVAT Credit

Excise Appeal No. 314 of 2010 and Excise Appeal No. 323 of 2010 were filed by the appellant to challenge the orders dated 14.10.2009 and 23.10.2009, respectively, which denied CENVAT credit for certain items and directed its recovery with interest and penalty. The core issue was whether the items in question qualified as 'capital goods' under rule 2(a)(A) of the CENVAT Credit Rules, 2004. The Commissioner held that the items did not qualify as 'capital goods' and the appellant failed to produce documentary evidence to establish the use of these items in the fabrication of capital goods. However, the Tribunal found that the appellant had maintained records and provided evidence, including a Chartered Engineer's certificate, showing that the items were used in the expansion of the factory and fabrication of machinery necessary for manufacturing the final product. The Tribunal also referred to its own previous decisions in similar matters involving the appellant, which supported the appellant's claim for CENVAT credit.

Issue 2: Imposition of Penalty on the Managing Director

Excise Appeal No. 315 of 2010 and Excise Appeal No. 324 of 2010 were filed by the Managing Director, Gautam Goel, to challenge the imposition of a penalty of Rs. 10 lakhs on him. The Commissioner had imposed the penalty on the grounds that Gautam Goel was actively involved in the incorrect availment of CENVAT credit. However, the Tribunal found no evidence on record to suggest that Gautam Goel was involved in the day-to-day affairs of the appellant, particularly with regard to the availment of CENVAT credit. Consequently, the Tribunal held that the imposition of the penalty on Gautam Goel could not be sustained.

Conclusion:

The Tribunal set aside the orders dated 14.10.2009 and 23.10.2009, allowing the appeals filed by the appellant and Gautam Goel. The Tribunal concluded that the appellant was entitled to avail CENVAT credit on the items in question and that the penalty imposed on Gautam Goel was unjustified.

(Order pronounced on 18.07.2023)