2019 (8) TMI 1170 - AT - Central Excise

Demand of Interest and penalty - irregular availment of CENVAT Credit - input services used in the manufacture of exempted /non-excisable products - credit reversed as soon as being pointed out, before utilization - period April 2006 to December 2006 - HELD THAT - The appellant had, without utilizing the credit reversed the same on being pointed out by the Department. Therefore, in terms of the ratio laid down by the Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX LARGE TAXPAYER UNIT, BANGALORE VERSUS M/S BILL FORGE PVT LTD, BANGALORE 2011 (4) TMI 969 - KARNATAKA HIGH COURT no interest or penalty can be imposed upon the appellant. Reversal of CENVAT credit which has been taken before its utilization is as good as not taking the credit at all - Interest and penalty set aside. Demand of Central Excise duty - MS gratings - job-work - It is the case of the department that the appellant had got these MS gratings manufactured through job workers and they were, therefore, liable to pay central excise duty on these goods - assessee claims the goods to be capital goods and exempt from tax - HELD THAT - It is true that as per the definition of capital goods in the CENVAT Credit Rules, 2004 only goods falling under Chapter 82, 84, 85 and 90 of the Central Excise Tariff are covered. However, components, spares and accessories of the aforesaid goods are also covered as capital goods in the definition itself. No restriction of the Central Excise Tariff heading of these components, spares or accessories is given in the definition - For this reason, the gratings manufactured by the appellant through their job workers and used in their plant mainly as stairs and platforms meant for workers to walk around and climb up and down in the plant, do qualify as accessories of the plant itself. Therefore, they get covered by the definition of Capital Goods - the exemption under N/N. 67/95-CE is available to them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of CENVAT credit on input services used in the manufacture of exempted products.
2. Demand of Central Excise duty on MS gratings used as capital goods.

Analysis:

Issue 1: Denial of CENVAT credit on input services:
The appellant, a manufacturer of Ethanol, contested the denial of CENVAT credit amounting to ?1,84,322/- on input services utilized during April 2006 to December 2006. The appellant had availed but not utilized the credit, which was later reversed upon Department's notification. The Department issued a show-cause notice demanding interest and imposing a penalty on the reversed credit. The appellant argued that interest and penalty should not be imposed as the credit was not utilized, citing legal precedents. The Tribunal, following the decision in CCE vs. Bill Forge Pvt. Ltd., held that no interest or penalty could be imposed when CENVAT credit, though availed, was not utilized and subsequently reversed.

Issue 2: Demand of Central Excise duty on MS gratings:
The second issue involved a demand of ?2,34,980/- Central Excise duty on MS gratings manufactured on job work basis. The appellant contended that these gratings were capital goods used within their factory and hence exempted under Notification No.67/95-CE. The Revenue argued that since the gratings did not fall under specified chapters in the CENVAT Credit Rules, they did not qualify as capital goods. The Tribunal analyzed the definition of capital goods under the Rules and concluded that as long as the gratings were components, spares, or accessories of capital goods, they qualified as capital goods. Relying on the case law of Thiru Arooran Sugars, the Tribunal held that the gratings, used as stairs and platforms in the plant, were indeed accessories of the plant and thus eligible for exemption. Consequently, the demand of Central Excise duty and penalty were set aside.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and providing consequential relief to the appellant.