2015 (4) TMI 525 - AT - Central Excise

Denial of CENVAT Credit - Capital goods - goods not mentioned in declaration - Held that - So far as the the Modvat Credit in respect of Steel items namely MS Angles HR Coils Black Steel Tubes ER Wire Steel Plates etc. is concerned the appellants claim backened by the certificate given by their Chief Engineer is that these items have been used either as parts of the Sugar Mill Machinery or as supporting Structure for the machinery and that in both the cases during period prior to 23.07.1996 the capital goods cenvat credit would be admissible as during period prior to 23.07.1996 the definition of capital goods also covered plant and the Tribunal in the case of Shakumbari Sugar and Allied Industries Ltd. vs CCE Meerut-I reported in 2013 (9) TMI 316 - CESTAT NEW DELHI has held that since for the period prior to 23.07.1996 the definition of capital goods as given in Rule 57 Q of the Central Excise Rules 1944 covered plant MS Angles Channels Section Bars etc. used for making supporting structures for machinery would also be covered by the definition of capital goods and would be admissible for cenvat credit. However as regards denial of Modvat Credit from period January 1997 to March 1997 in appeal E/2015/09 since during this period the definition of capital goods as it existed during period prior to 23.07.1996 has been substituted by a new definition which covered the goods of certain specified chapter headings and as such for this period the iron and steel items would be eligible for credit as inputs only if the same had been used for manufacture of capital goods or their parts and would not be eligible for credit if the same had been used as foundation or supporting structure for machinery the matter would have to be remanded to the Original Adjudicating Authority after examining the appellants plea on the question regarding their usage. The cenvat credit for this period would be admissible only in respect of that quantity of iron and steel which had been used for fabricating sugar mill machinery or its components. As regards denial of cenvat credit in respect of nickel screen and denial of cenvat credit in respect of gunny bags the credit has been denied only on the ground that the same are not covered by the declaration. However on going through the records it is seen that this ground for denial is not factually correct as both the items are covered by the declarations filed by the appellant. Therefore the denial of Modvat credit in respect of these items is set aside. As regards denial of the Modvat Credit in respect of Steel items for the period prior to 23.07.1996 and in respect of nickel screen and gunny bags is set aside. The part of the order denying the Modvat Credit in respect of Steel Items for period January 1997 to March 1997 is also set aside and this matter is remanded to Original Adjudicating Authority for de novo decision after hearing the appellant regarding the use of steel items. - Decided in favour of assessee.

Summary

Issues involved:
1. Admissibility of Modvat credit for various steel items used in manufacturing plant.
2. Disallowance of Modvat credit for nickel screen and gunny bags based on declaration.
3. Interpretation of the definition of capital goods for the period prior to 23.07.1996.
4. Imposition of penalty for conflicting judgments on Modvat credit.

Admissibility of Modvat Credit for Steel Items:
The appellant, a manufacturer of sugar and chemicals, claimed Modvat credit for steel items used in their manufacturing plant. The dispute revolved around the admissibility of credit for items like MS Angles, HR Coils, and Steel Tubes. The Chief Engineer certified that these items were used in machinery or as supporting structures. The Tribunal referred to past judgments, including the Shakumbari Sugar case, to establish that for the period before 23.07.1996, the definition of capital goods included plant and machinery components. Consequently, the denial of Modvat credit for the steel items during specific periods was deemed incorrect, and the impugned order was set aside. However, for a later period (January 1997 to March 1997), a remand was ordered to determine the eligibility of credit based on the revised definition of capital goods.

Denial of Modvat Credit for Nickel Screen and Gunny Bags:
The denial of Modvat credit for nickel screen and gunny bags was based on the absence of declarations. Upon review, it was found that the items were indeed covered by the declarations filed by the appellant. Therefore, the denial of credit for these items was overturned, as the grounds for denial were factually incorrect.

Interpretation of Capital Goods Definition:
The appellant argued that the definition of capital goods for the period before 23.07.1996 included items used for supporting machinery structures. Citing relevant judgments, the Tribunal agreed with this interpretation and held that steel items used as supporting structures for machinery were eligible for Modvat credit during this period. The Tribunal also clarified that the revised definition for a later period necessitated a reevaluation of the credit eligibility for iron and steel items used in specific capacities.

Penalty Imposition for Conflicting Judgments:
Due to conflicting judgments on the admissibility of Modvat credit for steel items used as structural support, the imposition of penalties was deemed unwarranted. The Tribunal highlighted the evolving nature of the legal interpretations in this regard and concluded that penalties were not justified in such circumstances.

In conclusion, the Tribunal set aside the impugned order denying Modvat credit for steel items, nickel screen, and gunny bags. A remand was directed for reevaluation of credit eligibility for a specific period, and penalties were deemed inapplicable due to conflicting legal precedents.