2016 (2) TMI 989 - AT - Central Excise

Tribunal allows appeal on CENVAT credit for renovation services, reduces penalty.

M/s Polygenta Technologies Ltd. Versus CCE, Nashik

M/s Polygenta Technologies Ltd. Versus CCE, Nashik - 2016 (45) S.T.R. 435 (Tri. - Mumbai) Issues:- Appeal against Order-in-Appeal No. AKP/38/NSK/2010 dated 22.02.2011- Disallowance of CENVAT credit on input services for renovation and modernization activities- Reduction of penalty from Rs. 3,49,724 to Rs. 2000- Interpretation of exemption Notification No. 30/2004-CE dated 09.07.2004Analysis:1. The appeal was filed against Order-in-Appeal No. AKP/38/NSK/2010 dated 22.02.2011, where the Commissioner rejected the appeal but reduced the penalty imposed by the Adjudicating Authority from Rs. 3,49,724 to Rs. 2000. The case involved the disallowance of CENVAT credit on input services related to modernization and renovation activities of the factory premises.2. The Appellant, engaged in manufacturing excisable goods, availed CENVAT credit on input services for renovation and modernization activities. The show cause notice alleged that the Appellant cleared finished goods at NIL duty by availing exemptions under Notification No. 30/2004-CE dated 09.07.2004 and Notification No. 04/2006-CE dated 01.03.2006.3. The Adjudicating Authority disallowed the CENVAT credit in the Order-in-Original, stating that since the goods were cleared under exemption, the Appellant was not entitled to the credit. The Commissioner (Appeals) upheld this decision but reduced the penalty. The Appellant contended that no goods were cleared under exemption during the period in question, and therefore, the credit should not have been denied.4. The Appellant's counsel argued that the CENVAT credit was taken for renovation and modernization purposes, completed before the goods were cleared on payment of duty. It was emphasized that no goods were cleared under exemption during the relevant period, making it incorrect to deny the credit based on simultaneous exemption availing.5. The Revenue's representative reiterated that the goods were cleared under exemption in May 2009, hence the Appellant was not entitled to avail the CENVAT credit. However, the Tribunal noted that the renovation and modernization services were not utilized for manufacturing exempted goods, and no goods were cleared under exemption after the factory upgrades. Therefore, the CENVAT credit on input services related to dutiable goods manufacturing was allowed.6. Considering the undisputed facts presented, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the CENVAT credit should be allowed when the service is related to the manufacturing of dutiable goods, even if exemption was availed for other products.