2023 (6) TMI 448 - AT - Central Excise

Recovery of Central Excise duty - shortages of 189.50 MT of Pig Iron - valid reasons for shortages were given or not - HELD THAT - The shortage was noticed during the course of stock taking by the Anti Evasion wing of Haldia Commissionerate. The Appellant could not offer any valid reason for the shortages. In fact the Appellant has paid the duty and cess along with interest on the shortages. Hence, the demand of duty and cess along with interest on the shortages upheld. Since there was no proper explanation for the shortages, the penalty imposed under section 11 AC of the Central Excise Act,1944 also upheld. Irregular availment and utilization of credit on the Angles, Channels, Beams, Joists etc - HELD THAT - The said items of iron and steel products were the inputs used in the manufacture of capital goods and the said capital goods were in turn used in the manufacture of their final products. The said goods were also used in the pollution control system. The structure and effluent system are taken together will constitute a unit of pollution control system - As per Rule 2(k) of Cenvat Credit Rules, 2002, Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. In the present case, the Angles, Channels, Beams, Joists are the inputs used in the manufacture of capital goods namely, pollution control system. The structure and effluent system are taken together constitute a unit of pollution control system. Hence, it can be construed that the Angles, Channels, Beams are used in the manufacture of capital goods and hence they fall within the ambit of inputs eligible for credit - The Appellant are eligible for the credit of Rs.5,82,44,793.93 availed on the Angles, Channels, Beams, Joists used in the manufacture of capital goods. Disallowance of credit taken on welding Electrodes and MIG wires - HELD THAT - The Appellant stated that the the said goods were used in the manufacture of capital goods and in the repairs and maintenance of plant and machineries and hence they are eligible for the credit. In support of their contention, they relied upon the decision in the case of AMBUJA CEMENTS EASTERN LTD. VERSUS COMMISSIONER OF C. EX., RAIPUR 2010 (4) TMI 429 - CHHAITISGARH HIGH COURT , wherein it has been held that CENVAT credit is available to welding electrodes used in the repair and maintenance of machineries - the Appellant are eligible for the credit of Rs33,63,796.67 on the welding Electrodes and MIG Wires used in repair and maintenance of machineries, as inputs under Rule 2(k) of the CENVAT Credit Rules, 2004. Denial of credit availed on 73.66 M.T of Iron ore Fines on the ground that they were not used in the manufacture of final products - HELD THAT - The Appellant stated that the fines contained in the Ore procured by them from M/s Tata Metalinks were thicker in size which can be used in their DRI plant to produce sponge iron . It is observed that the receipt and duty paid nature of the iron ore are not in dispute. The Appellant states that the iron ore fines received by them were thicker in size and can be utilised to produce sponge iron . There is no evidence brought on record to disprove this claim. Since, the receipt and duty paid nature of the inputs are not in dispute and no other evidence brought on record to establish that the iron ore fines were not utilised in the manufacture of their final products, it is held that the Appellant are eligible for the credit of Rs 23680.68 availed on the iron ore fines. The demand of Rs. 3,82,278/- confirmed in the impugned order on the shortages of 189.50 MT of Pig Iron. The demand of interest and penalty on this count is also confirmed. The other demands on Angles, Channels, Beams Joists and welding electrodes, MIG Pipes and the demand on Iron Ore fines set aside. Accordingly, the impugned order is modified on the above lines. Appeal disposed off.

Summary

Issues involved:
The issues involved in the judgment are the shortage of pig iron, irregular availment of credit on iron and steel products, disallowed credit on welding electrodes and MIG wires, and disallowed credit on iron ore fines.

Shortage of Pig Iron:
The appellant was found to have a shortage of 189.50 M.T of pig iron during a stock verification. The Commissioner confirmed a demand of Rs. 3,80,611/- on the shortages and imposed a penalty equivalent to the amount of duty. The Appellant failed to provide a valid reason for the shortages and paid the duty, cess, and interest on the shortages. The Tribunal upheld the demand of duty, cess, interest, and penalty on the shortages due to lack of proper explanation.

Irregular Availment of Credit on Iron and Steel Products:
The Commissioner disallowed an amount of Rs. 5,82,44,793.93 irregularly availed and utilized by the appellant on iron and steel products like Angles, Channels, Beams, Joists. The Tribunal held that these items were used in the manufacture of capital goods, including pollution control systems, making them eligible for credit. The Tribunal allowed the credit on these items used in the manufacture of capital goods.

Disallowed Credit on Welding Electrodes and MIG Wires:
The Commissioner disallowed credit of Rs. 33,63,796.67 on welding electrodes and MIG wires. The Appellant argued that these items were used in the manufacture of capital goods and in repairs and maintenance of plant and machinery, making them eligible for credit. Citing relevant case law, the Tribunal allowed the credit on welding electrodes and MIG wires used in repairs and maintenance of machinery.

Disallowed Credit on Iron Ore Fines:
The Commissioner disallowed credit of Rs. 23,670.68 on 73.66 M.T of iron ore fines, alleging they were not used in the manufacture of final products. The Appellant contended that the fines were thicker in size and could be used in their DRI plant to produce sponge iron. The Tribunal found no evidence to disprove this claim and held that the Appellant was eligible for the credit on the iron ore fines.

Conclusion:
The Tribunal upheld the demand on the shortage of pig iron but set aside the demands on iron and steel products, welding electrodes, MIG wires, and iron ore fines. The impugned order was modified accordingly, and the appeal was disposed of in favor of the Appellant.