2023 (11) TMI 162 - AT - Central Excise

Denial of CENVAT Credit - unfinished mild steel (MS) pipes - failure to deploy any equipment for production - reversal of CENVAT Credit - credit reversed before issuance of SCN - HELD THAT - It is found that mild steel (MS) pipes procured by them had been cleared on payment of duty after undertaking some processing. It is now settled law that with duty having been paid, it was not open to central excise authorities to dispute credit availed on the goods procured for the purpose. It was not alleged in the notice that the appellant was at any time deficient in credit availability at any point in time during the period of dispute; to allow the plea of remand would be nothing but authorizing contemplation of proceedings beyond the period of limitation by bringing new charges against the assessee. There is, thus, no ground for sustaining the disallowance of credit of ₹ 39,73,256. For the claim of the appellant that angles , beams and channels were covered within definition of capital goods in rule 2(a) of CENVAT Credit Rules, 2004, reliance was placed on the decision of the Tribunal in M/S. MANGLAM CEMENT LTD. VERSUS C.C.E., JAIPUR-I 2018 (3) TMI 1547 - CESTAT NEW DELHI and in CC CE, VISAKHAPATNAM VERSUS M/S. A.P.P. MILLS LIMITED 2013 (7) TMI 494 - CESTAT BANGALORE . It is, however, on record that the appellant had not yet procured the cranes for whose support the said goods had been purportedly deployed. The facts being, thus, at variance with the cited decisions and, the capital goods , not having been installed the claim of eligibility of goods used for installing structural support is not tenable. CENVAT Credit Rules, 2004 offers the framework and the mechanics for neutralization of duty discharged at preceding stage of value addition chain ; it is, therefore, procedural enunciation in which availment , as is reversal , is in the hands of assessee while restoration , as is recovery, of credit is left to the jurisdictional authorities. While rule 14 of CENVAT Credit Rules, 2004 enables recourse to section 11A of Central Excise Act, 1944 as does rule 15 of CENVAT Credit Rules, 2004 enabling recourse to section 11AC of Central Excise Act, 1944, the latter cannot be drawn upon in the absence of the former - It is on record that the credit of ₹ 14,55,597 had been reversed well before issue of notice. There was, thus, no cause to initiate proceedings under rule 14 of CENVAT Credit Rules, 2004; it would appear that absurdity of appropriating credit already reversed, and not restorable without prior approval from jurisdictional central excise authorities, does not seem have occurred to the adjudicating authority as an exercise in futility. The appeal is allowed to the extent of setting aside recovery of ₹ 39,73,256 and of the penalty in full.

Summary

Issues Involved:
1. Denial of CENVAT credit on procured 'mild steel (MS) pipes'.
2. Denial of credit on 'angles', 'beams', and 'channels' used for 'structural support'.
3. Imposition of interest and penalty under section 11AB and section 11AC of Central Excise Act, 1944.

Summary:

Issue 1: Denial of CENVAT credit on procured 'mild steel (MS) pipes'

The appellant, a manufacturer of 'mild steel (MS) pipes', faced proceedings culminating in the impugned order due to allegations that M/s Mehta Intertrade Steels P Ltd, though registered under Central Excise Rules, 2002, had not deployed any equipment for production. The demand of Rs. 39,73,256 was confirmed on the ground that the procured 'mild steel (MS) pipes' were not inputs as defined in rule 2(k) of CENVAT Credit Rules, 2004 and hence, ineligible in terms of rule 3 of CENVAT Credit Rules, 2004. The Tribunal held that once duty had been paid on the processed goods, it was not open to central excise authorities to dispute credit availed on the goods procured for the purpose. This was supported by decisions from various high courts and the Tribunal itself, including Creative Enterprises, Ajinkya Enterprises, and Fine Packaging Pvt Ltd.

Issue 2: Denial of credit on 'angles', 'beams', and 'channels' used for 'structural support'

The appellant contended that 'angles', 'beams', and 'channels' used as structural support for 'electric overhead travelling (EOT) cranes' should be considered 'capital goods' and eligible for credit. However, the Tribunal found that the appellant had not yet procured the 'cranes' for which the said goods were purportedly deployed. Therefore, the claim of eligibility for these goods was not tenable under rule 2(k) of CENVAT Credit Rules, 2004. The disallowance of credit of Rs. 14,55,597 was upheld.

Issue 3: Imposition of interest and penalty under section 11AB and section 11AC of Central Excise Act, 1944

The Tribunal noted that the credit of Rs. 14,55,597 had been reversed by the appellant well before the issue of the notice. Therefore, there was no cause to initiate proceedings under rule 14 of CENVAT Credit Rules, 2004. The initiation of proceedings and the penalty imposed were deemed void ab initio. Consequently, the appeal was allowed to the extent of setting aside the recovery of Rs. 39,73,256 and the penalty in full.

Conclusion

The appeal was allowed in part, setting aside the recovery of Rs. 39,73,256 and the penalty, while upholding the disallowance of credit of Rs. 14,55,597. The decision emphasized the procedural framework of CENVAT Credit Rules, 2004 and the necessity for jurisdictional authorities to adhere to these rules.