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TMI Blog2013 (3) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... final product. The CESTAT observed that there is no dispute about the facts, that in fabrication of capital goods, the CENVAT credit was taken for M.S. angles, channels, plates etc. The appellant, however, neither specifically intimated the department at any point of time nor the details of these items of capital goods fabricated was declared in ER-I, returns filed by the appellant. The drawings and designs of the capital goods claimed to have been fabricated along with the plant of the material used were not produced before the Adjudicating Authority on the basis of which it could be ascertained as to how much quantity of structural steel material was used for various items of capital goods claimed to have been fabricated. The store ledgers and the store issue slips did not establish the use of structural steel items issued - the questions raised in these appeals are questions of fact, and thus no substantial questions of law arise for consideration by us in these appeals - against assessee. Penalty is to be attracted in this case as the appellants had taken CENVAT credit without satisfying the conditions set out and in violation of the CENVAT Credit Rules. Respectful agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling under Chapter 17 of the First Schedule to the Central Excise Tariff Act, 1985. The company has set up a unit in village Bhaisana, District Muzaffarnagar for manufacture of cane sugar, with installed cane crushing capacity of 7000 tonnes; a unit in village Thanabhawan, District Muzaffarnagar with installed cane crushing capacity of 7000 tonnes crushing per day and a third unit in Village Bilai, District Bijnor with installed cane crushing capacity of 7000 tonnes crushing per day. All the three units started manufacturing from October, 2005. 5. The units submitted their formal start up intimation to all the Government departments, and to the Range Superintendent, Central Excise before starting the commercial production. They intended to avail CENVAT credit on inputs and capital goods received during the period/process of setting up of their new manufacturing factory and obtained Central Excise registration from the office of Assistant Commissioner, Division Muzaffarnagar in the month of August, 2004 for Bhaisana and Thanebhawan units in District Muzaffarnagar and for Bilai unit in District Bijnore. The appellants vide intimation letters dated 6.4.2005 informed the Range Supe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure of for non-capital goods items such as staircases, purlins, partitions, buildings and roofing etc., the appellants have not taken CENVAT credit. 10. By a common order dated 19.5.2006 the Commissioner, Central Excise, Meerut-I adjudicated the matter in respect of all the three units and disallowed the entire CENVAT credit of Rs.2,02,96,271/- availed by the appellants on inputs and cable goods for Bhaisana unit; Rs. 1,90,52,382/- for Thanebhawan unit in District Muzaffarnagar, and Rs.1,65,69,326/- for Bilai unit in District Bijnor under Rule 14 of the CENVAT Credit Rule, 2005 read with Section 11A of the Central Excise Act, 1944. He also ordered charging of interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 at the appropriate rate in respect of all the three units and also imposed penalty of the amount equal to demand in respect of all the three units under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 11. Aggrieved the appellants preferred appeals under Section 35-B of the Central Excise Act, 1944 in the Customs, Excise and Service Tax Appellate Tribunal (CEST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished. The Commissioner and the CESTAT did not even apply their minds to the documents on record. There is no findings with reference to these documents. The entire credit has been disallowed arbitrarily and illegally. 15. Shri S.K. Bagaria submits that the Tribunal had granted interim orders staying orders of the Commissioner in all the matters with the findings that the use of items in the manufacture/fabrication in the capital goods was not disputed by the revenue. The capital goods manufactured out of items in question were further used in the manufacture of excisable goods. A very strong case was found by the CESTAT at the admission stage in favour of appellants and predeposit of whole of the demand and penalty was waived of for hearing of the appeal. There was no change in the factual position thereafter. 16. It is submitted that the capital goods manufactured in the factory and used within the factory in manufacture of excisable goods were fully exempt from central excise duty under Notification No.67/95 C.E. No other formality was required, nor there is any provision requiring any further records. This notification was not considered by the authorities and the CESTAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of capital goods. There was no necessity or requirement of these being covered by any heading or sub heading. This position is clear from the rule itself and has been clarified by Central Board of Excise and Customs in Circular No. 276/110/96TRU dated 2.12.1996. The goods in question were Bagasse Elevator Roller Chain, cane carrier, steam boiling sheet, Delta therm, Channel, Thread locker, aluminum sheets/coils, rubber sheet, nichel screen etc. as per show cause notices themselves. There was never any dispute about the nature and description of these goods. The only ground taken in the show cause notices was that these items are not covered by the definition of capital goods. The allegation is ex-facie contrary to the definition itself. 22. Shri R.C. Shukla, appearing for the department, has defended the orders passed by the Commissioner, Central Excise, Meerut-I and CESTAT. He submits that in their ER1 returns the appellant did not declare the use of these items in manufacture of capital goods. They could not satisfy the Commissioner, Meerut-I and the CESTAT nor could explain from the chart as to whether these items were actually used in manufacture of capital goods. A specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al product. The CENVAT Credit Rules in order to avail CENVAT credit, require the assessee to establish that the items in question were actually put to use for manufacture, or in relation to manufacture of final product, or the capital goods for which the assessee seeks to avail CENVAT credit. The CESTAT did not find any error in the order of the Commissioner, Meerut-I in denying the CENVAT credit as the appellant had failed to prove that the items, on which the CENVAT credit was claimed, were actually used for fabrication of capital goods used for manufacture of final product. In the order dated 26.9.2012 rejecting the application under Section 35C (2) of the Act the CESTAT has given reasons as to why it had affirmed the order of the Commissioner, Meerut-I. The CESTAT observed that there is no dispute about the facts, that in fabrication of capital goods, the CENVAT credit was taken for M.S. angles, channels, plates etc. The appellant, however, neither specifically intimated the department at any point of time nor the details of these items of capital goods fabricated was declared in ER-I, returns filed by the appellant. The drawings and designs of the capital goods claimed to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule to the Excise Tariff Act and (ii) pollution control equipments. It is submitted that the CENVAT credit is applicable for a manufacturer under Rule 3 (1) or purchaser of final product or a provider of taxable service to take credit of excise duty or the duties specified in Rule 3 (1) (i) to (xi) paid on any inputs or capital goods received in the factory for manufacturer of final product or premises of the provider, to output service on or after 10th day of September, 2004. The definition of the word input in rule 2 (k) is to be understood with Explanations 1 2. Explanation 2 provides that input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. 28. There is no dispute that the CENVAT Credit Rules, 2004 have undergone change to the effect, as provided in Explanation 2 to Rule 2 (k) to include in the definition of input to include goods used in the manufacture of capital goods. We are, however, not concerned here with the legal position as to whether goods used by the appellant will be treated as input in the manufacture of capital goods, which are further used in the factory for manufacturer. The CESTAT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the duty determined as contemplated by Section 11AC is mandatory and there is no discretion in the adjudicating authority or the Tribunal to impose different amount of penalty. In a case where penalty is leviable under section 11AC on fulfilment of the conditions as enumerated in Section 11AC, the penalty equal to the amount of duty determined is mandatory and there is no discretion in the Tribunal to reduce the said penalty. However, as laid down by the apex Court in Union of India Vs. Rajasthan Spinning and Weaving Mills (supra), the penalty under section 11AC can be imposed only when conditions mentioned in Section 11AC exist. The authorities have no discretion in fixing the quantum of penalty and penalty equal to the duty must be imposed once section 11Ac is made applicable. In view of the foregoing discussions, the question of law is answered in favour of the revenue in following manner. "The appellate Tribunal had no discretion to reduce the amount of penalty as specified under section 11 AC" The appeal is allowed. Parties shall bear their own cost. 32. We are in respectful agreement with the reasons given in Commissioner of Customs Central Excise vs. M/s Majes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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