2024 (9) TMI 1169 - AT - Central Excise

CENVAT Credit - Inputs/capital goods - ISO Tank which is used for packing and transportation of the appellant s excisable final product namely Di-methyl Sulphate (DMS) from factory to the consignee premises/destination - denial on the ground that the appellant have taken credit under capital goods account and the ISO tank is not capital goods - HELD THAT - The appellant realising their mistake claimed the Cenvat credit on packaging material i.e. ISO tank considering as input during the adjudication process. The Learned Commissioner should have examined that whether such ISO tank falls under the category of inputs and accordingly decided the matter on that basis. We are of the view that merely because the appellant under a belief treated the ISO tank as capital goods and taken the credit under that account does not make them disentitled for the Cenvat credit, if otherwise available on ISO tank has input. Therefore, not considering this aspect by the adjudicating authority is clearly violation of principles of Natural Justice. Merely because the appellant have taken the credit under the capital goods but if it is available under input, the credit should be extended. However, since the Commissioner has not examined the entire matter considering the ISO Tank as input the impugned order is not legal and proper. The Learned Commissioner should re-examine the matter - the impugned order is set aside - matter remanded to the adjudicating authority for passing a fresh order - appeal allowed by way of remand.

Summary

Issues:
Whether the appellant is entitled to Cenvat Credit on ISO Tank used for packing and transportation of the final product.

Analysis:
The issue in this case revolves around the entitlement of the appellant to claim Cenvat Credit on an ISO Tank used for packing and transporting the final product. The appellant initially availed the credit under the "Capital Goods" category but later realized it should have been claimed as "inputs." The adjudicating authority denied the credit, stating that the ISO tank does not qualify as capital goods. The appellant argued that as per various board circulars, they are entitled to the credit if the value of durable packaging material is included in the assessable value of the final product. They also cited several judgments and circulars to support their claim.

The Tribunal found that the adjudicating authority erred in denying the credit solely based on the appellant's initial classification of the ISO tank as capital goods. The Tribunal opined that if the ISO tank qualifies as an input, the credit should be allowed, regardless of the initial classification. The failure of the adjudicating authority to consider whether the ISO tank falls under the category of inputs amounted to a violation of principles of Natural Justice. The Tribunal held that the impugned order was not legal and proper due to this oversight.

Consequently, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for a fresh decision. The adjudicating authority was directed to re-examine the issue, considering the ISO Tank as an input this time. The Commissioner was instructed to take into account all relevant circulars and judgments cited by the appellant. The appellant was granted a fair opportunity to present their case, and the adjudicating authority was mandated to issue a fresh order within one month from the date of the Tribunal's order. The appeal was allowed by way of remand to the adjudicating authority for further proceedings.