2023 (9) TMI 1086 - AT - Central Excise

CENVAT Credit - inputs/capital goods - MS channel, MS Angles, MS drums, MS Pipe, HR Sheets, CR Sheets, MS Fabricated support etc. used in the manufacture of processed drums / reels, packing drums - MS Drums etc. which were used during the manufacturing process as well as packaging of the final product namely electric wires and cables - time limitation - HELD THAT - As per the fact of the present case in view of the chartered engineer certificate submitted by the appellant, the use of the goods is not under dispute that the same were used in the manufacture of processed drums/ packing drums/ bobbin. These drums are used in relation to manufacture of final product as per the nature of the final product which is wire and cables. The wires and cables for purpose of processing in the manufacture are shifted from one process machine to other process machine which is possible only after winding of wires and cables on the drums and also for the purpose of packing by winding of final product. On the basis of this use the goods i.e. iron and steel material are clearly used in or in relation the manufacture, directly or indirectly, whether contained or not in the final product. It is settled that if any goods used in the manufacture/fabrication of capital goods and such manufactured/fabricated goods used within the factory of the assessee, cenvat credit is admissible. Accordingly, on merit the appellant have rightly availed cenvat credit on iron and steel materials used for manufacture of processed drums/reels/packing drums etc. which were further used in the factory of the appellant manufacturer. Time Limitation - HELD THAT - When issue involve is of interpretation of cenvat credit rules, no mala fide can be attributed to the appellant. Further, the appellant have been declaring the availment of cenvat credit which is in dispute in their ER- 1 return, therefore, there is no suppression and wilful mis-statement with intent to evade duty on the part of the appellant. Accordingly, the demand for the extended period is not sustainable also on limitation. In the present case also the demand for the extended period is not sustainable on limitation also. The impugned order are not sustainable - Appeal allowed.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on MS Channel, MS Angles, MS Drums, MS Pipe, HR Sheets, CR Sheets, MS Fabricated support etc.
2. Classification of goods as capital goods or inputs under Cenvat Credit Rules, 2004.
3. Invocation of extended period of limitation and associated penalties.

Summary:

1. Eligibility of Cenvat Credit:
The appellant, engaged in manufacturing electric wires and cables, claimed Cenvat credit on various steel items used in the manufacture of processed drums and packing drums. The department argued that these goods do not qualify as capital goods or components under Rule 2(a)(A) of the Cenvat Credit Rules, 2004, leading to the issuance of multiple show cause notices proposing denial and recovery of Cenvat credit along with interest and penalties.

2. Classification of Goods:
The Adjudicating Authority denied the Cenvat credit on grounds that the goods were neither capital goods nor inputs. The appellant contended that these goods were used in the manufacturing process and thus should be considered as parts or accessories of capital goods, making them eligible for credit under Rule 2(a)(A)(iii). They also argued that the goods fall under the definition of inputs as per Explanation 2 to Rule 2(k) of the Cenvat Credit Rules, 2004, since they were used in the manufacture of capital goods within the factory. The Tribunal supported this view, citing various judgments such as *Rajasthan Spinning and Weaving Mills* and *Vandana Global Ltd*, which affirmed that goods used in the manufacture of capital goods are eligible for Cenvat credit.

3. Extended Period of Limitation and Penalties:
The appellant argued against the invocation of the extended period of limitation, asserting that there was no suppression of facts as they regularly filed ER-1 returns disclosing the availment of Cenvat credit. The Tribunal agreed, noting that the issue involved interpretation of Cenvat Credit Rules and there was no intent to evade duty. Consequently, the demand for the extended period was deemed unsustainable, and penalties were not justified.

Conclusion:
The Tribunal concluded that the appellant is entitled to Cenvat credit on the disputed goods, both as capital goods and inputs. The extended period of limitation and associated penalties were also found to be unjustified. The impugned orders were set aside, and the appeals were allowed.