2013 (9) TMI 536 - AT - Central Excise

CENVAT credit - Burden to Prove - Angles, Channels, Plates, Sections, Beams, Flats, etc. - Revenue was of the view that the credit was wrongly taken as there was no evidence that the items had been used for manufacture of capital goods for use in the factory - Held that - Held that - Since the appellant had failed to discharge their onus the order was correct - By reading of the Explanation it was apparent that if the inputs have gone into manufacture of capital goods, then only they were eligible for Cenvat credit and such capital goods must be put to actual manufacture of final product - it was only within their knowledge as to how and in what manner these items were put in use - In the adjudication proceedings the appellant despite of the fact that they were given opportunity of hearing did not lead any evidence to indicate as to which items of structural steel plates, and in what quantity were used for fabrication of machinery - The Commissioner had no option but to hold that the appellant failed to discharge onus regarding use of items in question as inputs for manufacture of capital goods - Not only this admittedly the appellants in the ER-1 returns filed by them, did not declare the use of these items in manufacture of capital goods. The M.S. Angles, Channels, Plates, Sections, etc. were claimed to have been used for fabrication of various items of machinery for use in the factory, no evidence in support of this claim has been produced in spite of ample opportunities having been given to the appellants - neither the manufacture of any capital goods had been declared in ER-1 Returns nor any specific intimation had been given regarding use of the structural steel items in manufacture of capital goods - when the appellants had taken Cenvat credit in respect of items like M.S. Angles, Channels, Plates, Section etc. falling under Chapter 72 & 73 of Central Excise Tariff Act which were not covered under the definition of capital goods, Cenvat credit in respect of these items would be admissible as input only if there was evidence on record showing their use in the manufacture of capital goods for use in the factory the burden of producing evidence in this regard was on the appellant but the appellants had not discharged the burden of proof and that the Commissioner had rightly disallowed the Cenvat credit in respect of these items and there was no infirmity in the order - Decided against Assesses.

Summary

Issues:
Claim of Cenvat credit for structural steel items used in fabrication of plant and machinery.

Analysis:
The appellants, having Sugar Mills at different locations, claimed Cenvat credit for items used in the fabrication of plant and machinery. The department issued show cause notices for the recovery of this credit, leading to the Commissioner confirming the demand along with interest and penalties. The appellants filed three appeals against this decision.

During the hearing, the appellants argued that the items claimed for Cenvat credit were indeed used in the manufacture of machinery, providing details to the department. They contended that they only availed credit for the quantity of items used in machinery fabrication and not for structural steel items used in supporting structures. On the other hand, the department defended the decision, stating that no evidence supported the appellants' claim of using the items for capital goods manufacture. The department emphasized that the burden of proof lay with the appellants, which they failed to discharge.

The Tribunal examined the submissions and records, noting that the items in question were used during the commissioning of new plants before manufacturing units were operational. As these items did not fall under the definition of 'Capital Goods,' the appellants needed to establish their use in capital goods manufacture to be eligible for Cenvat credit as 'Inputs.' Referring to the Cenvat Credit Rules, the Tribunal highlighted the requirement for the appellants to prove the actual use of the items in the manufacture of final products or capital goods.

Upon review, the Tribunal found that the appellants had not adequately demonstrated the specific use of structural steel items in machinery fabrication. The evidence provided was vague and lacked detailed information on the quantity and utilization of the items. Moreover, the appellants did not declare the use of these items in capital goods manufacture in their ER-1 returns. Consequently, the Tribunal upheld the Commissioner's decision, stating that the appellants had failed to meet the burden of proof.

In conclusion, the Tribunal dismissed all appeals and recommended that instructions be issued to avoid similar disputes in the future. By requiring Assessees to inform authorities in advance about the fabrication of capital goods using structural steel items and declaring such activities in returns, the scope for disputes and litigation could be reduced significantly.