2015 (10) TMI 1343 - AT - Central Excise

Denial of CENVAT Credit - Capital goods - Held that - Credit was disallowed only on the premise that the original equipment was purchased in 1991 where no credit scheme was in force. Prima facie , I find that there was no such provision in Cenvat rules for denial of capital goods credit on the parts imported for replacement, particularly during that period original equipments were not covered under modvat scheme. Compensation scheme from the insurance company has no relevance for availment of credit on capital goods purchased in 2006. Prima facie , appellants have made out a case for waiver of predeposit of demand in question. Accordingly, predeposit of dues arising out of the impugned order is waived and recovery thereof stayed during pendency of appeal - Stay granted.

Summary

Issues: Denial of capital goods credit on spare parts purchased for replacement due to a fire accident in 2006.

Analysis:
1. Denial of Capital Goods Credit: The main issue in this case pertains to the denial of capital goods credit on spare parts purchased for replacement due to a fire accident in 2006. The appellant argued that the original capital goods were procured in 1991 when no modvat credit scheme was available. The appellant received compensation from the insurance company after the fire accident, which included the excise duty component. The appellant contended that this compensation should not affect the credit availed on the spare parts purchased in 2006, as they did not claim capital goods credit on the equipment imported in 1991. The appellant relied on the case law in CCE Bangalore Vs Tata Advanced Materials Ltd. - 2011 (271) ELT 62 (Kar.) to support their argument.

2. Legal Standpoint: The appellant's advocate argued that the spare parts purchased in 2006 are governed by the Central Excise Rules, 2000, and there is no provision to deny this credit based on the lack of credit scheme availability when the original equipment was purchased in 1991. The Tribunal noted that the credit was disallowed solely because the original equipment was acquired in 1991 when no credit scheme was in place. However, the Tribunal found no provision in the Cenvat rules to justify the denial of capital goods credit on parts imported for replacement, especially when the original equipment was not covered under the modvat scheme during that period.

3. Decision and Predeposit Waiver: After considering the arguments presented by both parties, the Tribunal found that the compensation received from the insurance company had no bearing on the availment of credit on capital goods purchased in 2006. Consequently, the Tribunal concluded that the appellants had a valid case for the waiver of predeposit of the demand in question. Therefore, the Tribunal waived the predeposit of dues arising from the impugned order and stayed the recovery during the pendency of the appeal, allowing the stay application.

4. Final Verdict: In conclusion, the Tribunal ruled in favor of the appellant, acknowledging their entitlement to capital goods credit on the spare parts purchased for replacement following the fire accident in 2006. The Tribunal's decision highlighted the absence of a legal basis to deny the credit based on the lack of a credit scheme when the original equipment was procured in 1991. The judgment emphasized the importance of examining the relevant legal provisions and case laws to determine the eligibility for capital goods credit in similar circumstances.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the legal arguments presented by both parties, the Tribunal's decision, and the implications of the ruling on the denial of capital goods credit on spare parts purchased for replacement due to a fire accident in 2006.