2005 (3) TMI 307 - AT - Central Excise

Summary

Issues:
Cenvat credit disallowance on capital goods used outside factory premises.

Analysis:
The case involved the disallowance of Cenvat credit on capital goods utilized outside the factory premises. The company availed credit on Black Steel Tubes used for a pipeline connecting the factory to a river 12 kms away, contrary to Rule 57AA(1) of the Central Excise Rules, which mandates usage within the place of manufacture. Additionally, credit was taken on items not classified as capital goods. The Commissioner confirmed a demand, disallowed credit, and imposed interest and penalty. The appellants argued they voluntarily reversed a significant amount before the Show Cause Notice, with no suppression of facts, and thus penalty imposition was unwarranted. They contended the steel tubes were for drawing water to the factory, akin to an extension of the pipeline. Citing precedent in M/s. Pepsico India Holding Ltd. v. CCE, it was argued that such usage permitted Modvat credit. Relying on M/s. Piaggio Greaves Ltd. v. CCE, the Tribunal found penalty imposition unjustified when credit was voluntarily reversed. Consequently, the penalty was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellants, allowing the Cenvat credit on the capital goods used outside the factory premises. The decision was based on the understanding that the usage of the goods for drawing water to the factory constituted an extension of the pipeline, aligning with precedent cases. The Tribunal emphasized that penalty imposition was unjustified when credit reversal was voluntary, setting aside the penalty and allowing the appeal.