2015 (10) TMI 1679 - AT - Central Excise

Denial of CENVAT Credit - Bar of limitation - Held that - Materials were used for fabrication of machines namely, Winder Frame, Air Handling System, Cooling System, Dryer Structure etc. It is contended that weight, size and nature of the machines was such that its fabrication/ fixing to structures was essential with nuts and bolts because the attachment is not permanent and what is attached can be easily detached It is categorically stated that these items were used to install the machines at their factory. The appellant claimed that these items are accessories used in the plants and machineries. In terms of Clause (iii) of Rule 2(a) of Cenvat Credit Rules, 2004, Capital goods covers components, spares, accessories used in the goods specified in Clause (i) and Clause (ii) irrespective of any heading. The department failed to produce any material that these items were used as building materials. But, the appellant had given detailed use of these items in fabrication of machines in reply to show cause notice, which was not disputed by the adjudicating authority. Demand is barred by limitation. The appellant availed credit on these items and declared in their ER-1 returns. These items were used in various machineries. This fact was not refuted by the department. No material was available that the appellants suppressed the fact with intent to evade payment of duty. - impugned order can not be sustained on merits as well as on limitation. - Decided in favour of assessee.

Summary

Issues:
1. Denial of CENVAT credit on certain items under Central Excise Tariff Act, 1985.
2. Classification of items as capital goods.
3. Use of items as accessories in fabrication of machines.
4. Invocation of extended period of limitation.
5. Comparison with a relevant legal precedent.

Analysis:
1. The case involved the denial of CENVAT credit amounting to Rs. 12,52,642/- on items like MS Channels, Angles, M.S. Bars, Beams falling under Heading No. 72.14 and 72.16 of the Central Excise Tariff Act, 1985. The issue was whether these items qualified as capital goods as per Rule 2(a) of the Central Excise Rules, 2004, and if the denial of credit was justified. The adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals).

2. The appellant contended that the items were used as accessories in the fabrication of machines like Winder Frame, Air Handling System, Cooling System, Dryer Structure, falling under Clause (iii) of Rule 2(a) of the Rules. It was argued that the demand was also barred by limitation. The appellant provided detailed explanations and evidence of the use of these items in their monthly ER-1 returns. The Commissioner (Appeals) maintained that the items were used as building material without substantial evidence.

3. The learned Counsel for the appellant emphasized that the items were essential accessories for installing machines at the factory and were not used as building material. The appellant's submissions were supported by relevant case laws, including a decision of the Hon'ble Madras High Court in a similar matter involving the treatment of items like M.S. Plates, Angles, Channels as components for new plant machinery.

4. The Revenue argued that the items were used as building material and that the appellant had not disclosed their use in their Returns, justifying the invocation of the extended period of limitation. However, the appellant's detailed explanation and evidence of using the items as accessories in machinery fabrication were not effectively countered by the department.

5. The Tribunal, after considering the submissions and the legal precedent cited, found that the appellant's use of the items as accessories in machinery fabrication was valid. The demand for denial of CENVAT credit was held unjustified, and the appeal was allowed on the grounds that the impugned order could not be sustained on merits or limitation. The decision was influenced by the principles laid down in the legal precedent discussed during the proceedings.