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2024 (8) TMI 310 - AT - Central ExciseCENVAT Credit - capital goods or not - Chartered Engineer s certificate submitted by the appellant is sufficient to discharge the responsibility placed on appellant under Rule 9(5) of CCR 2004 or not - whether the case is no longer res-integra in view of the order passed by the Tribunal in their own case M/S. BERRY ALLOYS LIMITED VERSUS COMMISSIONER OF CENTRAL TAX, VISAKHAPATNAM-I 2022 (5) TMI 797 - CESTAT HYDERABAD ? - levy of penalty. HELD THAT - There is some force in the arguments made by the Learned DR that the rules applicable for the period in the present appeal were not same and therefore on that ground alone said order should not be made applicable to the present appeal. It is further found that the Tribunal has observed that receipt of goods and thereafter their use for fabrication as per Chartered Engineer s certificate is not contested, whereas, in the present case, the use is being doubted in the Order-in-Original upheld by the Commissioner (Appeals), in as much as the said certificate was considered as not sufficient to prove whether they were actually utilised in the fabrication of the capital goods or otherwise. Therefore, Rule 9(5) of CCR 2004 has not been considered. The facts of the case are more or less identical bearing few items the grounds taken for confirming demand, grounds and reasons for grant of relief by Tribunal are different. Firstly, in their order Tribunal had not examined applicability of Rule 9(5) of CCR. Also, though it was claimed as input in the relevant period, in the present appeal it has been claimed as capital goods . Admittedly, the declaration of capital goods was under different rules during the said period and apparently because of that it was claimed as input and not as capital goods. The format of Chartered Engineer s certificate perused by the Tribunal was also different than the one relied upon by the appellant in present appeal - the judgment in M/S. BERRY ALLOYS LIMITED VERSUS COMMISSIONER OF CENTRAL TAX, VISAKHAPATNAM-I 2022 (5) TMI 797 - CESTAT HYDERABAD cannot be applied in totality for deciding the present appeal where facts and submissions are slightly different as well as the rule position is also different. Therefore, this ground of the appellant is not tenable. Whether these items can be considered as capital goods or not? - HELD THAT - It is not the case, nor disputed by Department that various capital goods were fabricated/manufactured at site within the factory and that they were not falling under Chapter 82, 84, 85, 90 etc., or Pollution Control Equipment. In fact, the impugned order has tacitly accepted that these items could be considered as components. What is being disputed is whether these items were actually used as components of the capital goods covered within the definition of capital goods under Rule 2(a) within the factory in view of insufficiency of evidence adduced by the appellant. In so far as the issue whether such components would still be eligible for input credit on account of the fact that the goods were embedded to earth and thus not goods at all, the appellants have relied on plethora of judgments and it is observed that in various judgments it has been held that the goods which are embedded to earth and therefore not excisable, cannot be the ground for denial of Cenvat Credit as capital goods. The ground taken by the Revenue that since these items were used as components, spares etc., for fabrication of various capital equipments/goods embedded to earth would debar it from being considered as capital goods is not tenable. Thus, such goods would still be considered as components etc., if used in fabrication or construction of capital goods within the factory where such capital goods etc., are further used in the manufacture of excisable goods - apparently, what is being now disputed is whether the usage criteria has been clearly satisfied to consider as component. Thus, impugned items, except when used for making foundation etc., would fall within the definition of capital goods under category 2(a)(A)(iii). Whether in the given facts of the case, appellant has been able to specify the usage of such components in the capital goods fabricated within the factory of production or otherwise? - HELD THAT - From the description given by the Chartered Engineer, it is also not clear as to when and how such items were actually issued for fabrication of the intended main equipment. It also does not show what documents were verified and whether they had verified issue register, technical feasibility of utilisation of such items in the intended capital equipment, drawings, designs etc., to satisfy whether such items were required for manufacturing of final goods etc. This becomes more important especially when most of these items have multiple uses and can be used for various purposes and some of these items cannot be used for the intended purposes if they are not having specified technical parameters compatible with such use because of the high temperature etc., where only a specified variety of sheets, plates etc., can be used. Therefore, though theoretically these items can be considered as components, parts etc., for these equipments but were they actually used for such fabrication or uses as detailed in the Chartered Engineer certificate needs further corroboration to the satisfaction of the Competitive Authority. There are much force in the argument of the Department that in the present appeal, the appellants have failed to satisfy the lower authorities as regards its actual use which is crucial to decide usage and the extent of it s usage. Thus, in the fact of the case and statutory provisions what is needed is the verification and corroboration of the Chartered Engineer s certificate with the internal records by the Adjudicating Authority so as to satisfy him about its actual use in those intended capital equipments/goods etc. Imposition of penalty - HELD THAT - It is found that Original Authority has imposed penalty under Section 15(1) of CCR read with Section 11AC(1)(a) of Central Excise Act on the grounds that appellant has violated provisions of Rule 9(5) by not disclosing the actual usage, which came to their knowledge only when they informed the Department on being asked. However, this aspect would have to be redetermined in view of discussions in foregoing paras where admissibility of the entire demand would have to be re-determined. The matter is remanded to the Original Authority to go through the corroborative documents supporting the Chartered Engineer s certificate supporting actual use of such goods in fabrication/construction of capital goods as claimed by appellant and to allow credit to the extent they are proved to have been actually used in fabrication of those equipments / capital goods etc. Similarly, imposition of penalty would need to be redetermined - Appeal disposed off by way of remand.
Issues Involved
1. Whether the case is no longer res-integra in view of the order dated 09.05.2022 passed by the Tribunal in their own case. 2. Whether these items are covered within the definition of capital goods or otherwise. 3. Whether the Chartered Engineer's certificate submitted by the appellant is sufficient to discharge the responsibility placed on the appellant under Rule 9(5) of CCR 2004. Issue-wise Detailed Analysis 1. Whether the case is no longer res-integra in view of the order dated 09.05.2022 passed by the Tribunal in their own case The Tribunal examined the appellant's claim that the matter is no longer res-integra based on a previous order dated 09.05.2022, which dealt with a similar issue for the period September 2010 to July 2012. The Tribunal noted that the rules applicable during the period in the current appeal were different from those in the previous case. Specifically, the definition of capital goods underwent changes post-01.07.2012, making the earlier order not fully applicable. The Tribunal also observed that the previous order did not consider Rule 9(5) of CCR, which places the burden of proof on the manufacturer. 2. Whether these items are covered within the definition of capital goods or otherwise The Tribunal acknowledged that the items in question could be considered as capital goods if used as components of capital goods specified under Rule 2(a)(i) and (ii) of CCR. The impugned order tacitly accepted that these items could be considered as components. However, the primary dispute was whether these items were actually used as components of capital goods within the factory, given the insufficiency of evidence provided by the appellant. The Tribunal referred to various judgments that held that goods embedded to earth could still qualify for Cenvat Credit as capital goods, subject to the user test. Therefore, the Tribunal concluded that the items, except those used for making foundations, would fall within the definition of capital goods under Rule 2(a)(A)(iii). 3. Whether the Chartered Engineer's certificate submitted by the appellant is sufficient to discharge the responsibility placed on the appellant under Rule 9(5) of CCR 2004 The Tribunal found that the Chartered Engineer's certificate alone was not sufficient to prove the actual use of the items in the fabrication of capital goods. The certificate lacked details such as item descriptions, size, quality standards, and technical parameters. The Tribunal emphasized the importance of corroborative evidence, such as issue registers, technical feasibility reports, and drawings, to satisfy the usage criteria. The Tribunal cited various judgments supporting the view that a Chartered Engineer's certificate, per se, is not sufficient evidence under Rule 9(5) of CCR, which places the burden of proof on the manufacturer. Conclusion and Remand The Tribunal concluded that the appellant failed to provide sufficient corroborative evidence to support the Chartered Engineer's certificate. Therefore, the matter was remanded to the Original Authority to review the corroborative documents supporting the actual use of the goods in the fabrication of capital goods. The Original Authority was instructed to allow credit to the extent the items were proved to have been used in the fabrication of those capital goods. The issue of penalty imposition was also to be redetermined. Final Order The order of the Commissioner (Appeals) was set aside, and the appeal was disposed of by remanding the matter to the Original Authority for redetermination of the demand and applicable penalty. The appellant was instructed to produce all necessary documents within three months, and the Original Authority was to pass a speaking order within three months of the hearing. (Order Pronounced in open court on 31.07.2024)
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