2018 (1) TMI 479 - AT - Central Excise

CENVAT credit - capital goods - Furnace oil - Petroleum Coke - Plastic bags/sheets - Cotton chedda - LPG gas cylinder - Synthetic lubricants/grease - Held that - The LPG gas cylinder is not a capital goods as the gas cylinder is only carrying LPG gas on which central excise duty is paid by the bottlers. In my view, the said LPG gas is being a fuel, credit cannot be allowed, as the provisions of Rule 2(k) of the Cenvat Credit Rules, 2004 are very clear - credit denied. CENVAT credit - furnace oil - petroleum coke - plastic bags/sheets - cotton chedda - synthetic lubricants/grease - Held that - these items can be considered as inputs - It is undisputed that the said items are used in factory premises of the appellant and central excise duty has been discharged on these items by the supplier/manufacturer of the said items. However, the appellant needs to reverse the cenvat credit attributable to the quantum of these inputs used for manufacturing fabrics which are cleared by them availing the benefit of exemption N/N. 30/2004-CE - matter is remitted back to the adjudicating authority to calculate the amount which needs to be reversed by the appellant out of the cenvat credit availed by them and the appellant shall discharge the said proportionate amount as determined by the lower authorities along with interest. Time limitation - Held that - he said question need not be answered at this juncture as the availment of cenvat credit on the capital goods was being contested by the Revenue, appellant shifted stand claiming items as an input, which itself would mean that the appellant was aware that the inputs on which credit was availed would not fall under the category of capital goods - the argument regarding limitation is rejected. Penalty - Held that - As the issue involved in this case regarding interpretation on the eligibility to avail cenvat credit as inputs or capital goods, no penalty is warranted against the appellant. Appeal allowed in part.

Summary

Issues:
Eligibility to avail cenvat credit on specific items - Furnace oil, Petroleum Coke, Plastic bags/sheets, Cotton chedda, LPG gas cylinder, Synthetic lubricants/grease.

Analysis:
The appeal concerns the eligibility of availing cenvat credit on various items used by the appellant, a textile manufacturer, under Notification No.29/2004-CE and 30/2004-CE. The Revenue contends that these items do not qualify as capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004, necessitating credit reversal for the period from May 2003 to February 2006, along with interest and penalties.

The appellant argues that even if the items are not capital goods, they should be considered as inputs, citing procurement and usage within the factory premises. Reference is made to the case law of CCE, Meerut-I Vs. Modi Rubber Ltd., asserting that if an item initially treated as a capital good is not so, it can still be eligible for credit as an input. Specifically, the appellant argues for LPG gas cylinder credit, claiming it as a capital good used on-site.

The Tribunal rejects the claim for LPG gas cylinder credit, clarifying that it does not meet the definition of capital goods under Rule 2(k) of the Cenvat Credit Rules, 2004, as it is merely a vessel for LPG gas. Consequently, credit for the LPG gas cylinder for the period from May 2003 to February 2006 is denied, affirming the lower authorities' decision.

Regarding other items like furnace oil, petroleum coke, plastic bags/sheets, cotton chedda, and synthetic lubricants/grease, the Tribunal deems them eligible as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. These items, used within the factory and subject to central excise duty, are considered inputs for fabric manufacturing. The matter is remitted back to calculate the proportionate credit reversal for fabric manufacturing under exemption Notification No.30/2004-CE.

The Tribunal dismisses the limitation argument raised by the appellant, noting their awareness of the capital goods classification challenge by the Revenue, leading to a shift in claiming the items as inputs. Consequently, no penalty is imposed on the appellant for the interpretation issue of cenvat credit eligibility.

In conclusion, the appeal is disposed of with directions for credit reversal on specific items used for fabric manufacturing, while upholding the denial of LPG gas cylinder credit and rejecting the penalty imposition, emphasizing the distinction between capital goods and inputs in the context of cenvat credit eligibility.