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2018 (5) TMI 602 - AT - Central ExciseCENVAT credit - inputs - cement, steel, corner board, paper carrier, edge protector etc - 50% credit on capital goods - Held that - as regards inputs, paper carrier rope is a consumable during the manufacturing activity of paper in the appellants factory - Corner board is used during the paper handling process - CENVAT credit on these inputs eligible. CENVAT credit on capital goods - entire credit availed in first year itself - Held that - When there is no dispute as to the fact that they are eligible to avail CENVAT credit on the capital goods, at the most, the lower authorities could demand interest from the appellant for the CENVAT credit availed in excess in the first year but cannot deny the CENVAT credit equivalent to 50% of the amount involved. No penalty is required to be imposed on the appellant. Appeal disposed off.
Issues involved:
1. Eligibility to avail CENVAT credit on inputs like cement, steel, corner board, paper carrier, edge protector, etc. 2. Eligibility to avail 50% of the CENVAT credit on capital goods subsequently or otherwise. Detailed Analysis: 1. The issue in this case revolves around the eligibility of the appellant to avail CENVAT credit on various inputs. The appellant had availed CENVAT credit on central excise duty paid on cement and steel. The Revenue contended that the appellant cannot avail the credit based on a judgment of the Larger Bench of the Tribunal in the case of Vandana Global. However, subsequent judgments by the Hon'ble High Courts in the cases of Mundra Ports and Special Economic Zone Ltd and Thiru Arooran Sugars have held that CENVAT credit on cement and steel used for setting up a factory is eligible. The Tribunal found that the CENVAT credit availed on cement and steel consumed for setting up the industry should be allowed, as it was used for establishing a new plant by the appellant. 2. Regarding the credit on other inputs like corner board, paper carrier rope, edge protector, etc., the appellant claimed CENVAT credit on these items as they were used in or in relation to the manufacturing activity. The Tribunal examined the records and found that the inputs were indeed used during the manufacturing process. Therefore, the CENVAT credit availed on these inputs was deemed eligible for the appellant. 3. The issue of availing CENVAT credit on capital goods was also addressed in the judgment. The appellant had availed CENVAT credit on various capital goods in the year 2009-10. While there was no dispute regarding the eligibility of the appellant to avail CENVAT credit on these capital goods, an error was made by the appellant in availing the entire credit in the first year instead of following the 50% rule. The Tribunal held that while interest could be demanded for the excess credit availed in the first year, the demand confirmed against the appellant was unsustainable. The appellant was required to pay interest on the amount of 50% availed in excess in the first year, but the CENVAT credit equivalent to 50% of the amount involved could not be denied. Additionally, certain items such as lubricants, which were considered as inputs, were wrongly included in the capital goods category. The Tribunal clarified that the appellant was eligible to avail 100% CENVAT credit on such items. In conclusion, the Tribunal found that no penalty was required to be imposed on the appellant, and the appeal was disposed of accordingly.
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