2023 (9) TMI 565 - AT - Central Excise

CENVAT Credit - various items of MS steel etc., utilized in fabrication of capital goods like pollution control equipment, heating furnace, casting machine, coating machine, chimney, rolling machine, reheating machine, control panel, etc. - period December, 2005 to March, 2010 - extended period of limitation - HELD THAT - With the introduction of Cenvat credit rules 2004, capital goods as defined in rule 2(a)(A) of CCR includes items like pollution-control equipment, storage tank which are practically immovable. Thus, the concept of movable or immovable for allowing credit have been done away with. We further find Rule 2(K) of CCR entitles a manufacturer to take credit of all items/goods received in the factory of production whether forming part of the finished product or not. Even inputs received for fabrication of capital goods are also entitled for Cenvat credit. Only condition is that such fabricated capital goods should have been used in the production of dutiable finished goods. There is no such dispute raised in the SCN that the capital goods fabricated by the Appellant out of the inputs have not been used for manufacture of dutiable finished goods. Further, the Appellant have maintained proper records in the nature of purchase vouchers for the inputs, receipt of inputs in the factory of production and the utilisation of the same in fabrication/manufacture of capital goods. Such utilisation is also supported by the certificate of the Chartered Engineer which have not been found to be untrue - further there is no allegation in the SCN that the Appellant have clandestinely removed any of the inputs received. So far as beams/joints, etc., which have been used in the preparation of stand, etc., to support Plant and machinery or as structure for support of capital goods, the same is held allowable by Hon ble Madras High Court in the case of M/S. INDIA CEMENTS LTD. VERSUS THE CUSTOM, EXCISE AND SERVICE TAX THE COMMISSIONER OF CENTRAL EXCISE, 2015 (3) TMI 661 - MADRAS HIGH COURT . Extended period of limitation - HELD THAT - There is no case of any concealment, mis-statement or fraud on the part of the Appellant/assessee - it is further found that as regards the capital goods fabricated out of the inputs, there is no allegation that such capital goods have been sourced from any other manufacturer by the Appellant/ assessee - the extended period of limitation is not invokable. Appeal allowed.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on various items of MS steel used in the fabrication of capital goods.
2. Legitimacy of the suo-moto re-credit taken by the Appellant after initially reversing the Cenvat credit.

Summary:

Issue 1: Eligibility of Cenvat Credit on MS Steel Items
The core issue was whether the Appellant rightly took Cenvat credit on items like MS steel used in fabricating capital goods such as pollution control equipment, heating furnace, and rolling machine from December 2005 to March 2010. The Department observed ineligible credit availed on MS items, leading to a Show Cause Notice (SCN) invoking extended period of limitation and proposing disallowance of credit along with interest and penalty.

Upon initial adjudication, the Commissioner disallowed the Cenvat credit and ordered recovery, which was contested by the Appellant. The Tribunal remanded the matter for fresh consideration, directing the Appellant to produce evidence supporting their claim. The Deputy Commissioner, upon re-verification, found that most MS items were not eligible for Cenvat credit as they were not directly used as components of capital goods but were used in fabrication processes. However, steel pipes used for movement of water, oil, and gas were deemed eligible.

The Appellant argued that the items were essential for fabricating capital goods required for manufacturing TMT bars and MS billets. They cited various judicial precedents, including the reversal of the Larger Bench ruling in Vandana Global Ltd. by the Hon'ble High Court, which supported the eligibility of such items for Cenvat credit.

Issue 2: Legitimacy of Suo-Moto Re-Credit
The Appellant initially reversed the Cenvat credit under Departmental direction but later took back the credit suo-moto, believing it was entitled to it. The Commissioner disallowed this re-credit, deeming it unauthorized and ordered recovery along with interest and penalty.

Tribunal's Findings:
The Tribunal found that the Appellant had properly documented the receipt and utilization of MS items in fabricating capital goods, supported by Chartered Engineer certificates. The Tribunal noted that the concept of movable or immovable goods was irrelevant under the Cenvat Credit Rules, 2004, which allowed credit for inputs used in fabricating capital goods. The Tribunal also observed no evidence of clandestine removal of inputs or misstatement by the Appellant.

The Tribunal ruled that the Appellant was entitled to Cenvat credit on the disputed items, and the extended period of limitation was not invokable. The Tribunal set aside the Impugned Order, allowing the Appeal and entitling the Appellant to consequential benefits in accordance with the law.

Conclusion:
The Tribunal allowed the Appeal, recognizing the Appellant's entitlement to Cenvat credit on MS items used in fabricating capital goods and invalidating the extended period of limitation for recovery. The suo-moto re-credit taken by the Appellant was also deemed legitimate.