2013 (12) TMI 582 - AT - Central Excise

Appellant's Steel Items for Manufacturing MS Trays Deemed Capital Goods

The court held that the steel items sent by the appellant to job workers for manufacturing MS trays, which were integral to ovens falling under Chapter ... Inputs under Rule 2(k) – Fabrication of Capital goods – Waiver of Pre-deposit – Held that:- The definition of inputs as given in Rule 2 (k) covers the inputs used in the fabrication of capital goods for use in the factory and if the MS coils/sheets have been used for fabrication of MS Trays which are used in the ovens, the same would be eligible for Cenvat credit - the appellant from the very beginning had given an intimation to the department specifically mentioning that they would be sending the MS coils/sheets to the job workers for fabrication of MS trays and the job workers would return the MS trays alongwith the scrap to them. The appellant have also placed on record the job work challans under which the raw material had been sent to the job workers - when the appellant had specifically intimated the department as early as in March 2006, that they would be sending the Cenvat credit availed MS coils/sheets to job workers to get the MS trays fabricated, the department should have at least asked the appellant to produce the job work challans which according to them are available with them – Prima facie the appellant have case in their favour - The requirement of pre-deposit of Cenvat credit demand, interest and penalty waived till the disposal of appeal – Stay granted. Issues:1. Eligibility of Cenvat credit on steel items sent to job workers for fabrication of MS trays.2. Dispute regarding the definition of inputs and capital goods.3. Accusation of suppression of facts by the appellant.4. Consideration of waiver from the requirement of pre-deposit.Analysis:1. The appellant, a manufacturer of malt products, availed Cenvat credit on steel items sent to job workers for manufacturing MS trays. The department contended that these items were not covered under inputs or capital goods, leading to show cause notices for recovery of Cenvat credit, interest, and penalties.2. The appellant argued that the MS trays, being part of ovens falling under Chapter 84, qualified as capital goods. They maintained that the steel items were used in manufacturing these capital goods, making them eligible for Cenvat credit. The appellant had informed the department about sending the steel items to job workers for tray fabrication, supporting their claim with job work challans.3. The department, represented by the Jt. CDR, opposed the stay applications, emphasizing the lack of evidence regarding the appellant sending cenvated steel items to job workers. They argued that the steel items did not fit the definition of inputs or capital goods, and the appellant failed to provide crucial documentation, suggesting suppression of information.4. Upon review, the judge found that the MS trays, integral to the ovens, should be considered capital goods. The appellant's intimation to the department about sending steel items for tray fabrication, supported by job work challans, demonstrated a prima facie case in their favor. The judge concluded that the requirement of pre-deposit for Cenvat credit demand, interest, and penalty was waived, allowing for the stay of recovery pending appeal resolution.