CENVAT credit on inputs, capital goods parts and broad declarations was allowed, but suo motu reversal credit was disallowed.

CENVAT credit was treated as admissible on chem ash used for descaling boiler tubes and on components, spares and accessories of conveyors and opto indicators used with capital goods, because such inputs and parts were linked to manufacture and were not required to fit tariff classification independently. Credit was also not denied merely because individual items were not separately listed in a broad declaration, where statutory records showed receipt and use in manufacture. However, credit earlier reversed could not be taken back suo motu after an unprotested debit in the prescribed account; the related demand was sustained and penalty upheld, though reduced.

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Issues: (i) Whether credit was admissible on chem ash used for descaling boiler tubes and on components, spares and accessories of conveyors and opto indicators used with capital goods; (ii) whether denial of credit for non-listing of items in the declaration was justified despite broad declaration and maintenance of statutory records; (iii) whether the appellant could take suo motu credit of the amount earlier reversed and whether the consequent demand and penalty were sustainable.

Issue (i): Whether credit was admissible on chem ash used for descaling boiler tubes and on components, spares and accessories of conveyors and opto indicators used with capital goods.

Analysis: Chem ash used for cleaning and descaling boiler tubes was held to be used in relation to manufacture of the final products. As regards parts of conveyors and opto indicators, the entitlement to credit was not made dependent upon the items individually falling within the tariff classification specified for capital goods, so long as they were components, spares or accessories of such capital goods.

Conclusion: Credit on these items was allowable and the denial of credit on these counts was set aside in favour of the assessee.

Issue (ii): Whether denial of credit for non-listing of items in the declaration was justified despite broad declaration and maintenance of statutory records.

Analysis: The declaration was filed in broad terms, the goods were recorded in RG-23 Part I and Part II on a day-to-day basis, and there was no dispute about receipt of the goods or their use in manufacture. In these circumstances, mere non-listing of individual items in the declaration was not treated as sufficient to deny credit under the mandatory declaration requirement.

Conclusion: The denial of credit on this ground was not justified and was set aside in favour of the assessee.

Issue (iii): Whether the appellant could take suo motu credit of the amount earlier reversed and whether the consequent demand and penalty were sustainable.

Analysis: The earlier reversal was not shown to have been made by following the prescribed protest procedure. Once the amount stood debited, it was treated as payment to the Government account, and the appellant could not take back the credit suo motu. At the same time, the same amount could not be demanded twice, once as wrongly taken credit and again as wrongly utilized credit. Penalty was nevertheless warranted on this count.

Conclusion: The demand of the reversed amount was sustained and penalty was upheld, though reduced to Rs. 3 lakhs, in favour of the revenue on this issue.

Final Conclusion: The appeal succeeded only in part. Credit was allowed on chem ash, conveyor-related parts and the broadly declared capital goods, while the demand relating to the reversed credit and the uncontested amounts was sustained with reduced penalty.

Ratio Decidendi: Credit cannot be denied merely because individual items were not separately listed in a broad declaration when the goods were duly recorded and used in manufacture, but a party cannot take back credit suo motu after an unprotested debit in the prescribed account.

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