2014 (7) TMI 267 - AT - Central Excise

Denial of CENVAT Credit - whether the appellants are eligible to take Cenvat credit on MS plates, channels, beams, angles, etc., which are classifiable under Chapters 72 and 73 of CETA - Held that - items like tundish, buffels, former sheets, gasification plant are actually utilized in the manufacturing process by the appellant and there is no specific rejection of the claim of the appellant that these are parts/components of the finished goods or in the absence of such, they get utilized in the manufacture of their finished goods and therefore considered as inputs. Contrary to the findings recorded by the lower authorities, it is seen from the Chartered Engineer s certificate that it gives the size of the former sheets/tundish, number of such items required, the quantity of steel required for manufacture which on verification could have revealed whether the appellants have taken the credits correctly or not. No doubt there is a procedural omission in view of the fact that the appellant should have indicated these items to have been manufactured and shown in their returns and claimed Cenvat credit. To that extent, the appellant can be found fault with. However, in the absence of any evidence of diversion of items on which credit has been taken and in the absence of any contrary finding to find that Chartered Engineer s certificate to be invalid, prima facie, benefit of Cenvat credit cannot be denied to the appellant. - Decided in favour of assessee.

Summary

Issues:
Eligibility of appellants to take Cenvat credit on MS plates, channels, beams, angles, etc., under Chapters 72 and 73 of CETA.

Analysis:
The case involved a dispute regarding the eligibility of the appellants to claim Cenvat credit on certain items not classified as capital goods. The Revenue initiated proceedings to deny the credit, asserting that the items were not covered by the definition of capital goods. The appellants contended that the items should be treated as inputs, but this argument was also rejected, leading to the appeal.

The total amount under consideration was &8377; 2,84,036, with the credit availed between 1-8-2009 to 19-5-2010. The show cause notice was issued within a year, and no limitation issue was involved in the case.

During the proceedings, it was found that the appellants failed to provide sufficient evidence that the items were used for manufacturing capital goods. The Chartered Engineer's certificate submitted by the appellants was deemed insufficient as it lacked supporting documentary evidence and was produced after more than a year.

The show cause notice detailed the items on which credit was taken, with most items classified as inputs except for one. The notice proposed denying the credit, stating that if the appellants used the inputs for manufacturing capital goods, it should have been reflected in their returns. The appellants argued that due to their size, detailed records of input utilization were not maintained, but they provided a statement indicating the quantity purchased and utilized.

The appellate tribunal noted that the appellants had effectively demonstrated the utilization of raw materials in their manufacturing process. Despite procedural omissions, the tribunal found no evidence of diversion of items for which credit was taken. Thus, the appellants were deemed eligible for Cenvat credit, although a penalty was imposed for record-keeping lapses.

In conclusion, the tribunal allowed the appeal regarding Cenvat credit eligibility, setting aside the impugned order, and reduced the penalty to &8377; 30,000 to address the procedural shortcomings while acknowledging the appellants' entitlement to the credit.