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2024 (9) TMI 107 - AT - Central ExciseDenial of CENVAT Credit on components, spares and accessories of capital goods, along with interest - Denial of CENVAT credit on welding electrodes which had been used by the appellant for manufacture of their final product and maintenance thereof - demand of interest on suo motu reversal by the appellant of CENVAT Credit when they were having sufficient balance in their CENVAT Credit Account - imposition of penalty. Denial of CENVAT Credit on components, spares and accessories of capital goods, along with interest - HELD THAT - Admittedly, the clarification issued vide Circular No. 276/110/96-TRU dated 02.12.1996 is self-explanatory, which clarifies that ' As such, scope of this entry is not restricted only to the components, spares and accessories falling under Chapters 82, 84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespective of their classification.' - Therefore, all the components and parts mentioned hereinabove fall under the category of capital goods in terms of Rule 2(a) of the CENVAT Credit Rules, 2004. Thus, the appellant is entitled to take CENVAT Credit thereon. Denial of CENVAT credit on welding electrodes which had been used by the appellant for manufacture of their final product and maintenance thereof - HELD THAT - The welding electrodes are the inputs which were used in manufacturing the final products by the appellant. Therefore, in terms of Rule 2(k) of the CENVAT Credit Rules, 2004, the appellant is entitled to take CENVAT Credit. Interest - HELD THAT - The appellant was maintaining sufficient balance in their CENVAT Credit Account during the intervening period and therefore, no interest is payable by the appellant, as held by the Hon ble High Court of Karnataka in the case of Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . Penalty - HELD THAT - As the appellant is neither required to reverse CENVAT Credit nor liable to pay interest, therefore, no penalty is imposable on the appellant. The impugned order is set aside - appeal allowed.
Issues:
- Denial of CENVAT Credit on components, spares, and accessories of capital goods - Interest on reversal of CENVAT Credit - Imposition of penalty Detailed Analysis: 1. Denial of CENVAT Credit on components, spares, and accessories of capital goods: The appellant, an integrated steel plant, appealed against the demand of Rs.1,57,69,215 for denial of CENVAT Credit on various capital goods. The Revenue objected to the eligibility of CENVAT Credit on the grounds that some goods were not classified as "capital goods" under Rule 2(a) of the CENVAT Credit Rules, 2004. The appellant argued that the goods in question fell under the definition of "capital goods" and relied on Circular No. 276/110/96-TRU, which clarified that the scope of the entry is not restricted to specific chapters. The Tribunal held that all components mentioned fell under the category of "capital goods" and allowed the appellant to take CENVAT Credit. 2. Interest on reversal of CENVAT Credit: The appellant had reversed CENVAT Credit of Rs.7,52,60,823 on the direction of the Revenue. The Revenue sought interest on this reversal, but the appellant had maintained a sufficient balance in their CENVAT Credit Account. The Tribunal cited the case of Bill Forge Pvt. Ltd., where it was held that no interest is payable if there is a sufficient balance. Consequently, the Tribunal ruled that no interest was chargeable in this case. 3. Imposition of penalty: The appellant contested the Show Cause Notice, which led to the demand confirmation of Rs.9,10,30,038 and imposition of a penalty of Rs.4,55,15,019. However, since the appellant was entitled to the CENVAT Credit and no interest was payable, the Tribunal held that no penalty was imposable. The Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any. In conclusion, the Tribunal ruled in favor of the appellant on the denial of CENVAT Credit and interest on reversal, leading to the setting aside of the impugned order and no imposition of penalty. The judgment highlighted the importance of correctly interpreting the CENVAT Credit Rules and maintaining a sufficient balance in the CENVAT Credit Account to avoid interest liabilities.
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