2009 (2) TMI 670 - AT - Central Excise

Tribunal Upholds Disallowance of Cenvat Credit for Cement in Mines, Penalty Overturned

The Tribunal upheld the disallowance of Cenvat credit for cement used in mines for construction and repair, following the judgment of the Hon'ble ... Stay/Dispensation of pre-deposit - Valuation Issues:1. Eligibility of cement used for constructing supporting structures in mines for Cenvat credit.2. Disallowance of Cenvat credit by Assistant Commissioner and confirmation of demands along with penalty.3. Appeal against the order-in-appeal upholding disallowance of Cenvat credit.Analysis:Issue 1: Eligibility of cement for Cenvat creditThe primary issue in this case revolved around whether the cement used for constructing supporting structures in underground cavities in mines is eligible for Cenvat credit. The appellant had claimed Cenvat credit for the cement used during specific periods. The Assistant Commissioner disallowed the credit, which was upheld by the Commissioner (Appeals). The appellant cited a previous Tribunal order that supported their claim, but this was overturned by the Hon'ble Rajasthan High Court in a separate judgment. The Tribunal, considering the High Court's decision, found that the cement used in mines for construction and repair does not qualify as an input for Cenvat credit as it was not directly or indirectly used in the manufacturing process. Therefore, the Tribunal upheld the disallowance of Cenvat credit in this case.Issue 2: Disallowance of Cenvat credit and penaltyThe Assistant Commissioner had disallowed the Cenvat credit claimed by the appellant during specific periods and confirmed the demands, imposing penalties as well. The Commissioner (Appeals) upheld this decision. The appellant, while not contesting the Cenvat credit demand, sought the setting aside of the penalty. The Departmental Representative argued that the disallowance of credit and the penalty imposition were justified due to the appellant claiming credit on an ineligible item. However, the Tribunal, after considering both sides' submissions and records, found that the penalty imposition was not justified in the circumstances. Therefore, the Tribunal set aside the penalty while upholding the disallowance of Cenvat credit.In conclusion, the Tribunal upheld the disallowance of Cenvat credit for cement used in mines for construction and repair, based on the judgment of the Hon'ble Rajasthan High Court. However, the penalty imposed on the appellant was set aside considering the interpretation of the eligibility of cement for Cenvat credit. The appeal was disposed of accordingly.