2017 (10) TMI 789 - AT - Central Excise

CENVAT credit - steel items used for fabrication of staircase, platform and walkways of the sugar manufacturing equipment - Held that - the appellant is entitled to the same because it pertains to the steel items used for fabrication of staircase, platform and walkways which are necessary for the functioning of the capital goods and by following the ratio of the decision in the case of U.P. Sugar 2010 (8) TMI 900 - CESTAT NEW DELHI - CENVAT credit allowed. CENVAT credit - capital goods - credit on balance 50% - Held that - the appellant has stated in reply to the show-cause notice that the said credit pertains to 50% credit availed on the steel items during the period from November 2013 to March 2014 and the said credit pertains to the second 50% which was earlier allowed by the Commissioner - credit is admissible to the appellant. CENVAT credit - denial on the ground that no usage proof was provided by the appellant - Held that - this case needs to be remanded to the original authority to verify the usage of the material amounting to ₹ 1,38,766/- - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
Denial of CENVAT credit under Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A(1)(a) of the Central Excise Act, 1944 and imposition of penalty.

Analysis:

1. Denial of CENVAT Credit and Imposition of Penalty:
The appeal challenged the order denying CENVAT credit of ?8,14,137 along with interest and imposing a penalty. The appellant, engaged in sugar and molasses manufacturing, availed credit on steel items as capital goods. The Commissioner disallowed a portion of the credit under Rule 14 of the CENVAT Credit Rules, 2004. The appellant argued that the order was unsustainable as it did not consider evidence or precedents. The appellant contended that certain credits were essential for equipment support and had been allowed in previous cases. The Commissioner disallowed credits for lack of usage proof and for items not yet utilized. The Tribunal found that some disallowed credits were admissible, citing precedents. It remanded the case for verifying the usage of certain materials, allowing the appeal by way of remand for further verification.

2. Admissibility of CENVAT Credit:
The Tribunal held that credits amounting to ?26,380 for steel items used in essential functions were admissible, following relevant case law. It also allowed credits of ?6,48,208, stating that the second 50% credit was admissible as the first 50% had been allowed earlier. However, credits of ?1,38,766 were denied due to lack of usage proof. The Tribunal directed a remand for verification of this credit, instructing the appellant to provide usage documents for the materials. The decision was made based on the need for verifying actual usage before disallowing credits solely on assumptions.

3. Remand and Verification Process:
The Tribunal's decision to remand the case for verification of the credit amounting to ?1,38,766 highlighted the importance of providing usage proof for availed credits. The appellant was directed to produce necessary documents to substantiate the use of the goods in question. This remand process aimed to ensure a reasoned order based on verified information, emphasizing the significance of supporting documentation in claiming CENVAT credits. The remand allowed for a fair assessment of the admissibility of the disputed credit amount, promoting transparency and adherence to procedural requirements in tax matters.

This detailed analysis of the judgment addresses the issues involved, the arguments presented by both parties, the Tribunal's findings, and the direction for further verification through remand, ensuring a comprehensive understanding of the legal aspects and implications of the case.