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2014 (10) TMI 53 - AT - Central ExciseDisallowance of CENVAT Credit - Credit on capital goods - Held that - Same have been used for transportation of the raw sugar imported in bulk from the port for the import to the appellant s factory. Hence, in view of the Tribunal s judgment in the case of J.K. Sugar Ltd. vs. CCE, Meerut - II (2010 (5) TMI 212 - CESTAT, NEW DELHI), the same would not be eligible for Cenvat credit and, as such, the Cenvat credit demand on account of this item is upheld. As regards the Cenvat credit demand in respect of other items namely Welding Electrodes and MS Angles, Channels and Plates, the appellant s plea is that these items have been used for repair and maintenance of the plant and machinery and for this purpose, the steel has been used for fabrication of the components of the machinery for replacing the worn out parts. Conclusion that the steel items have not used for repair and maintenance of plant and machinery but have been used for supporting structures or foundation of the machinery, is not correct. Since, these items have been used for repair and maintenance, the same would be eligible for Cenvat credit, in view of judgment of Hon ble Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. - 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT and judgment of Hon ble Rajasthan High Court in the case of Union of India vs. Hindustan Zinc Ltd. reported in 2006 (5) TMI 44 - HIGH COURT RAJASTHAN . As regards welding electrodes, there is no dispute that the same have been used for repair and maintenance of plant and machinery. Therefore, the Cenvat credit demand on the basis of denial of Cenvat credit in respect of Welding Electrodes and steel items is not sustainable. while the Cenvat credit demand in respect of steel items and welding electrodes and penalty on this account is set aside, the Cenvat credit demand in respect of PP bags and penalty of equal amount is upheld. - Decided partly in favour of assessee.
Issues:
1. Eligibility of Cenvat credit for PP bags, Welding Electrodes, and Steel items. 2. Interpretation of Rule 2(k) of the Cenvat Credit Rules. 3. Applicability of Tribunal judgments on Cenvat credit eligibility. Analysis: Issue 1: Eligibility of Cenvat credit for PP bags, Welding Electrodes, and Steel items The appellant, a sugar mill, imported raw sugar in PP bags for manufacturing refined sugar and claimed Cenvat credit for PP bags, Welding Electrodes, and Steel items used in the process. The Department disallowed the credit, stating these items were not eligible. The Counsel for the appellant argued that PP bags were used for transportation and storage, Welding Electrodes for repair, and Steel items for fabricating machinery parts. The Department contended that Steel items were used for supporting structures, not repair. The Tribunal found PP bags ineligible for credit but allowed credit for Welding Electrodes and Steel items used for repair and maintenance based on evidence presented by the appellant. Issue 2: Interpretation of Rule 2(k) of the Cenvat Credit Rules The Department cited an amendment to Rule 2(k) excluding steel items used for machinery foundation or supporting structures from Cenvat credit eligibility. They argued that without evidence, Steel items were presumed to be used for supporting structures. However, the appellant presented a chartered engineer's certificate to support their claim of using Steel items for repair and maintenance, not as supporting structures. The Tribunal ruled in favor of the appellant, allowing Cenvat credit for Steel items based on evidence provided. Issue 3: Applicability of Tribunal judgments on Cenvat credit eligibility Both parties referenced Tribunal judgments to support their arguments. The Counsel for the appellant cited cases where Steel items used for repair were deemed eligible for credit. The Department referenced a judgment excluding PP bags from credit eligibility. The Tribunal considered these precedents but ultimately relied on the evidence presented by the appellant to determine the eligibility of Cenvat credit for the items in question. In conclusion, the Tribunal partially allowed the appeal, upholding the Cenvat credit demand for PP bags but setting aside the demand for Welding Electrodes and Steel items based on evidence supporting their use for repair and maintenance. The judgment emphasizes the importance of providing evidence to establish the eligibility of items for Cenvat credit and highlights the role of precedents in interpreting such matters.
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