2016 (12) TMI 17 - AT - Central Excise

CENVAT credit - TMT bars / MS bars / TOR steels etc. - construction of RCC (Reinforced Cement Concrete) structures which are cement pillars / columns required for installation of machinery in the course of expansion/modernization of their factory by enhancing the capacity of production - Held that - the subject items have been used for making supporting structures, parts, accessories for capital goods which are highly essential for carrying out the manufacturing process in the factory. Further the period involved is also prior to 07/07/2009. The issue whether credit can be availed on MS channels, bars, angles etc. was analysed in the case of India Cements Ltd. Vs. CES TAT 2015 (3) TMI 661 - MADRAS HIGH COURT , wherein the Hon ble Madras High court has held that MS angles, channels etc. used for supporting structures is eligible for credit - The second contention of the Department is that the explanation which restricts the use of MS items for fabrication introduced in the definition of inputs is applicable retrospectively as laid by Larger Bench of this Tribunal in the case of Vandana Global Ltd. 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) - following the ratio laid in the above judgments, I hold that the denial of credit is unjustified. The availment of credit wrongly by taking 100% credit in the same financial year - Held that - taking note of the fact that the appellant is eligible for balance 50% of credit in the subsequent year though wrongly availed in the same financial year, I hold that the same would amount to only a procedural lapse/ premature availment of credit. Therefore the appellant cannot be denied the credit but is liable to pay interest upon the amount so wrongly availed during the period of irregular availment of credit. The impugned order disallowing the credit on subject items is set aside - The demand of interest on the irregularly taken CENVAT credit of ₹ 18,83,061/- is sustained - The penalties are set aside - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Irregular availment of CENVAT credit on capital goods and excess credit taken in advance.

Analysis:
The appellants, engaged in cement manufacturing, availed CENVAT credit on TMT bars, MS bars, and TOR steels for constructing RCC structures like cement pillars/columns for factory expansion. Six show-cause notices were issued for alleged irregular credit availment. The adjudicating authority confirmed the demand, interest, and penalties, upheld by the Commissioner(Appeals), leading to this appeal.

Appellant's Argument:
The appellant contended that TOR bars were not used, mainly TM T bars and MS bars were utilized for fabricating supporting structures essential for machinery installation. They argued credit was admissible as capital goods or inputs for capital goods fabrication. Referring to CENVAT Credit Rules 2004, they claimed the credit was taken before 07/07/2009, making the denial improper.

Department's Argument:
The Department argued that TOR bars were used, which are construction materials, justifying the credit denial. They cited a retrospective application of an explanation in the definition of inputs from 07/07/2009 based on a legal precedent.

Judgment:
The Tribunal found that TOR bars were not used, only TM T bars and MS bars, supporting structures for machinery installation. The items were crucial for the manufacturing process. Referring to legal precedents, the Tribunal held that MS angles, channels for supporting structures are eligible for credit. They noted the retrospective application of the explanation was unjustified based on legal interpretations. Regarding alleged premature credit availment, the Tribunal considered a procedural lapse, allowing credit but imposing interest on the irregularly taken amount. The impugned order disallowing credit was set aside, interest demand sustained, and penalties annulled, partially allowing the appeal.