2016 (4) TMI 18 - AT - Central Excise

Denial of CENVAT credit with respect to motor vehicle chassis (Tractor) falling under Chapter 87 of the Central Excise Tariff Act, 1985 - interest and an equivalent amount of penalty has been imposed under Rule 13 (1) of CENVAT Credit Rules, 2002 - Held that - From the above definition of capital goods, goods of Chapter 87 are not covered within the definition of capital goods for the purpose of taking CENVAT Credit as capital goods. There is also nothing on record to suggest as to how the said goods are directly used in or in relation to the manufacture of metals, the end product of the appellant. It is observed from Order passed by the first appellate authority relied upon Supreme Court s judgment in the case of J.K. Cotton Mills Vs. C.C.ST (1964 (10) TMI 2 - SUPREME COURT OF INDIA ), where it is held that use of goods in relation to manufacture has to be clearly established. It is categorically held by the first appellate authority that motor vehicle chassis on which CENVAT Credit is taken has not been used directly in or in relation to the manufacture of the finished goods manufactured by the appellant. Accordingly, the Bench does not find any merit in interfering with denial of CENVAT Credit and interest ordered by the first appellate authority against the appellant. In the case of Gajra Gears Ltd. Vs. CCE (2015 (5) TMI 629 - SUPREME COURT ), Hon ble Apex Court also made the observations that material handling equipments like hand trolley or fork lift and operational machines are classifiable under Chapter 73 of the Central Excise Tariff and not eligible for CENVAT Credit. In view of the above observations and the settled proposition of law, appeal filed by the appellant with respect to admissibility of CENVAT Credit is rejected. So far as imposition of penalty upon the appellant is concerned, it is observed that the appellant is a Government of India undertaking and cannot be said to have any malafide intention to take CENVAT Credit by fraud, willful misstatement etc. Accordingly, penalty imposed upon the appellant is set aside.

Summary

Issues Involved:
1. Admissibility of CENVAT Credit on motor vehicle chassis under Chapter 87 of the Central Excise Tariff Act, 1985.
2. Imposition of penalty on the appellant.

Analysis:

Admissibility of CENVAT Credit on motor vehicle chassis:
The appeal was filed against Order-in-Appeal No.286/BBSR-I/04 upholding the denial of CENVAT Credit of ?2,48,178/- to the appellant along with interest and penalty under Rule 13 (1) of CENVAT Credit Rules, 2002. The appellant did not appear during the hearing, and the Revenue argued that the motor vehicle chassis does not qualify as capital goods under Rule 2 (b) of the CENVAT Credit Rules, 2002. The issue was whether CENVAT Credit on motor vehicle chassis falling under Chapter 87 is admissible to the appellant. The rule defines capital goods but excludes goods of Chapter 87. The first appellate authority found that the chassis was not directly used in or in relation to the manufacture of the appellant's final products, as required. The Tribunal rejected the appeal based on established legal precedents, including the Supreme Court's judgment in Gajra Gears Ltd. Vs. CCE, which clarified the classification of certain equipment under the Central Excise Tariff.

Imposition of penalty:
Regarding the penalty imposed on the appellant, it was noted that the appellant, a Government of India undertaking, did not have any malicious intent in claiming the CENVAT Credit. As a result, the penalty was set aside. The appeal was allowed only to the extent of setting aside the penalty, while the denial of CENVAT Credit was upheld based on the legal analysis and precedents discussed.

This comprehensive analysis of the judgment highlights the key issues of admissibility of CENVAT Credit on motor vehicle chassis and the imposition of penalty, providing a detailed understanding of the Tribunal's decision and the legal reasoning behind it.