2021 (9) TMI 695 - AT - Central Excise

Demand of amount collected in the name of duty u/s 11D - CENVAT credit - inputs or capital goods - imported Box Strapping Machines - said machines cleared as such on payment of duty equivalent to Cenvat credit availed in respect of CVD paid - Rule 5(3) of Cenvat Credit Rules, 2004 - HELD THAT - Right upto the Commissioner (Appeals) order the entire case was decided against the appellant on the premise that the appellant is not entitled for Cenvat credit on imported Box Strapping Machine as the same is falling under Chapter 39. On perusal of record and bills of entry, it is found that it is factually incorrect basis as the correct chapter heading of imported Box Strapping Machine is under heading 84229090. Since this is correct Chapter heading, imported Box Strapping Machine clearly fall under the definition of capital goods which covers the goods under chapter 84 as capital goods - the goods whether used for the manufacture of final product or lying in the factory of the assessee, Cenvat credit on capital goods is admissible. Moreover, the appellant have cleared the imported Box Strapping Machine as such on payment of excise duty which is equivalent to the Cenvat credit availed thereon. For this reason also, no demand can be raised as the appellant is eligible for Cenvat on capital goods cleared as such, in terms of Rule 5(3) of Cenvat Credit Rules, 2004. There is no fault on the part of the appellant either for availing Cenvat credit or for removal of the same on payment of duty. Therefore, the disallowance of Cenvat credit as well as demand under Section 11D are set-aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit on imported Box Strapping Machines, confirmation of excise duty under Section 11D, and imposition of consequential interest and penalty.

Analysis:
Issue 1: Denial of Cenvat credit on imported Box Strapping Machines
The appellant, engaged in manufacturing box straps, imported Fully Automatic and Semi-automatic Strapping Machines under Chapter heading 84. The department denied Cenvat credit, contending these machines were neither capital goods nor inputs. The appellant cleared the machines after availing Cenvat credit and paying duty. The appellant argued that the denial was based on the incorrect Chapter heading mentioned as Chapter 39. The Tribunal found the correct Chapter heading as 84229090, falling under capital goods definition in Chapter 84. It clarified that capital goods need not be used in the final product's manufacture, only requiring classification under Chapter 84 and use in the assessee's factory. Consequently, the appellant was entitled to Cenvat credit on the imported machines, and the denial was set aside.

Issue 2: Confirmation of excise duty under Section 11D
The department invoked Section 11D of the Central Excise Act, 1944, confirming excise duty due to the denied Cenvat credit utilization. The appellant argued that since the credit was used for duty payment on machine clearance, Section 11D was inapplicable. The Tribunal agreed, noting the appellant's eligibility for Cenvat on capital goods cleared as such under Rule 5(3) of Cenvat Credit Rules, 2004. Consequently, the demand under Section 11D was set aside, along with any consequential interest and penalty.

In conclusion, the Tribunal allowed the appeal, granting the appellant relief in accordance with the law. The judgment clarified the correct classification of the imported machines, upheld the appellant's entitlement to Cenvat credit as capital goods, and rejected the demand under Section 11D due to the permissible clearance of capital goods.