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TMI Blog2016 (11) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... spat Nigam Limited (herein after referred as the assessee), Visakhapatnam, are engaged in the manufacture of Iron and Steel products of Ch. No. 72 and are availing the facility of credit of duty paid on the capital goods and inputs under the CENVAT Credit Rules 2002. On scrutiny of the returns filed under Rule 7 of the CENVAT Credit Rules, for the period from 4/2002 to 3/2003, it appeared to the department that they had: a) availed CENVAT Credit on certain inputs / capital goods like Checkered Plates, MS Plates, Beams, Flats etc. which were used in their auxiliary shops; b) removed certain goods Acetylene gas, Coal Tar Pitch, Pig Iron, Steel Scrap, MS Angles, for captive consumption on payment of duty under their Internal Challans called Internal Material Consumption Notes (IMCNs) issued by various stores; c) taken credit on certain inputs/goods, which were not properly declared, and they were described by their brand name or company name like Nalco; d) availed credit on Welding Electrodes used in the repairs and maintenance of the machinery and also in civil maintenance/construction; e) taken CENVAT Credit on High Tensile Steel scrap (7212.30) for use in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss; e) in the case of credit on seals and steel straps, he allowed credit as admissible on seals whether these are inputs or capital goods as these are used in the packing of the finished products and there are no valid grounds to deny the credit. Allowed credit on the steel straps stating that these are used in the packing on contract by ITW and there is no infirmity in availing the credit on the basis of invoices issued by ITW, Medak in the name of ITW, Visakhapatnam; f) entire credit on Welding Electrodes denied on the ground that these were used in repair or auxiliary shops as no duty is paid on used items repaired/remade in the workshop or in the auxiliary shops; g) Credit held admissible on Aluminium Wire Rods on the ground that they are used in the manufacturing process subject to the condition that the assessee furnished a proper statement of use of inputs/ capital goods to avoid such notices; Accordingly, the adjudicating authority: i)Disallowed the inter alia credit of ₹ 3,44,87,475/- as detailed in the Annexure and ordered for recovery of ₹ 3,32,05,284/- after adjusting the amounts already paid, under the provisions of Rule 12 of the CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n welding Electrodes as they were used in the repairs and maintenance/ construction g) Credit on various capital goods items like street light fittings, batteries etc is not admissible as these are not used in or relation to the manufacture of the final products. Accordingly, the Commissioner vide the said O-I-O has ordered that in respect of: i. Show Cause Notice dated 30.04.04 proposing to deny credit of an amount of ₹ 2,40,21,732/-, an amount of ₹ 59,99,249/- has been allowed, ii. Show Cause Notice dated 25.05.04 proposing to deny credit of an amount of ₹ 1,04,92,533/-, an amount of ₹ 40,79,128/- has been allowed. iii. Show Cause Notice dated 21.07.04 proposing to deny credit of an amount of ₹ 14,54,311/-, an amount of ₹ 91,011/- has been allowed. iv. Imposed a cumulative penalty of ₹ 10,00,000/- under Rule 13 of Cenvat Credit rules, 2002 and Rule 25/27 of CER, 2002, along with interest in accordance with the provisions of Section 11AB, in respect of all the 3 Show-Cause Notices. Aggrieved, the department has preferred appeal no. E/960/2005. 5. The grounds raised by department are as follows: I) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per their chapter heading nos. The Show Cause Notices also allege that the usage of these capital goods is not known. The commissioner has allowed the credit on some items but has not discussed the allegations of the show Cause Notices before allowing the credit. No discussion was made even in the Order-in-Original No.71/03-04. V) The Show Cause Notice dated 30.04.04 proposed denial of the balance 50% credit on the capital gods on which the first 50% credit was taken during the year 2003-04 and which was proposed to be denied in earlier Show Cause Notices. Out of the total amount the Commissioner has allowed credit of an amount of ₹ 35,04,297/- but has not discussed the same in the order. Even in the Order-in-Original no.71/03-04, there was no discussion on this matter. VI) The Show Cause Notice dated 21.07.04 has proposed denial of credit on various capital goods as detailed in Annexure B to the notice on the ground that the goods do not satisfy the definition of capital gods as per Rule 2(b) of the Cenvat Credit rules, 2002. The Commissioner has allowed credit of an amount of ₹ 91,011/- but has not made a discussion about how the goods are eligible for credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tar pitch, O2 gas, Argon gas etc it is well settled that credit is available on inputs used in intermediate exempt product which are captively consumed on manufacture of dutiable final products. Further in their own case RINL Vs CCE [2006 (205) ELT 811 (Tri- Bang)] it has been held that goods like Anthracine oil, Oxygen, Acetylene, Argon, Iron and Steel goods used as inputs in Auxiliary shops are eligible for credit. v) with reference to Steel straps/seals, Commissioner has correctly held that there is no infirmity in availing credit since steel straps are used in packing vi) with reference to inputs with brand name Commissioner has allowed credit after reasoning that there is no allegation that the inputs have been diverted or otherwise not used in manufacturing factory. vii) with reference to Aluminium wire rod coils, Commissioner has correctly allowed credit after appreciating that said input is directly used in the steel making process. viii) with reference to capital goods Commissioner has allowed credit after considering submissions made by them. 11. Heard both sides. The eligibility of various inputs and capital goods for the purpose of availment of C ..... 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