2017 (1) TMI 1121 - AT - Central Excise

MODVAT/CENVAT Credit - eligibility of credit - capital goods mainly CRSS Coil, HR Coils and Copper Cathode - Held that - the eligibility of Cenvat/Modvat Credit on capital goods or inputs are depending on the use of the items in the manufacture of the final products as defined in the Cenvat Credit Rules or erstwhile Central Excise Rules, 1944 - In the present case, either the appellant had not produced the details of the use of the items before the lower authorities or the Adjudicating Authority had not examined the manufacturing process in respect of use of these items. It is appropriate that the matter should be remanded to the Adjudicating Authority to decide afresh after examining the use of these items - appeal allowed by way of remand.

Summary

Issues:
De novo order disallowing MODVAT credit on CRSS, HR coils, and Copper Cathode; Penalty imposition under Rule 57U and Rule 73Q of Central Excise Rules, 1944; Eligibility of Cenvat Credit on capital goods; Nexus of items with the manufacturing of final products; Barred by limitation; Use of HR Bar CRSS Coils as capital goods or inputs.

Analysis:
The appeal was filed against a de novo order disallowing MODVAT credit on CRSS, HR coils, and Copper Cathode, with penalties imposed under Rule 57U and Rule 73Q of Central Excise Rules, 1944. The appellant, a manufacturer of final products, argued that the items in question, namely CRSS sheets, HR Coils, and Copper Cathodes, were essential for the manufacturing process and had a direct nexus to the final products. They contended that these items were not readily available in the market and were custom-made for specific manufacturing purposes. The appellant emphasized the importance of these items in the annealing and rolling processes to achieve the desired product quality. They also highlighted that the demand was time-barred as the show-cause notice was issued much after the limitation period of six months.

The Revenue, however, argued that the use of HR Bar CRSS Coils did not qualify as capital goods or inputs as per the Central Excise Rules, 1944. They contended that developing capacities to fabricate these spares would not be economical when similar items were available in the market at a lower cost. The Revenue emphasized that the appellant failed to provide sufficient evidence to prove the eligibility of these items for Cenvat Credit.

Upon reviewing the case records, the Tribunal found that the Adjudicating Authority had not been presented with adequate documentary evidence regarding the use of the items in question. The Tribunal noted conflicting claims between the appellant and the Commissioner regarding the usage and necessity of these items in the manufacturing process. As the eligibility of Cenvat/Modvat Credit depended on the items' use in the manufacture of final products, the Tribunal decided to remand the matter to the Adjudicating Authority for a fresh examination. The Tribunal directed the appellant to provide relevant materials demonstrating the use of these items as capital goods or inputs. Both parties were given the opportunity to present additional evidence, and the Adjudicating Authority was instructed to expedite the decision-making process due to the case's age.

In conclusion, the Tribunal allowed the appeal by remanding the case for further examination, emphasizing the importance of establishing the use of the items in the manufacturing process to determine their eligibility for Cenvat Credit.