2014 (6) TMI 622 - AT - Central Excise

Tribunal grants appeal on Cenvat Credit, sets aside penalty, upholds interest demand with consequential relief.

The Tribunal allowed the appeal regarding the eligibility of Cenvat Credit on various items, set aside the penalty, and upheld the demand for interest on ... Denial of CENVAT Credit - various items used and consumed for setting up such a refinery - non-filing of the declaration - HTPE sheets, insulation packages, domestic (refractory) anchors etc. though not falling under specific Chapters of 84, 85 and 90, are used in the refinery as either components or spares in the plant and machinery which are used for the manufacturing of the final products - Substantial time was taken for setting up the entire refinery - Held that:- Capital goods and other goods were received and consumed in the setting up of the unit, mere non-filing of the declaration cannot be a ground for denial of credit in the view which has been upheld by the Hon’ble High Court of Madras in the case of Kothari Sugars & Chemicals (2008 (10) TMI 627 - Madras High Court ). We also find strong force in the contentions raised by the Ld. Counsel that sustantative benefits should not be denied to an assessee only on the ground of non-fulfillment of procedural conditions. As long as, there being no dispute as to the duty paid character of the capital goods / other goods, and the receipt in and consumption thereof, there cannot be the denial of Cenvat Credit to the appellant. - Decision in the case of Jewel Brushes Pvt. Ltd. [2008 (4) TMI 644 - CESTAT, AHMEDABAD], Steelco Gujarat Ltd. [2010 (2) TMI 307 - GUJARAT HIGH COURT] and Vimal Enterprises [2005 (7) TMI 111 - HIGH COURT OF GUJARAT AT AHMEDABAD] followed - Credit allowed. As regards HTPE sheets, insulation packages, domestic (refractory) anchors etc. - Held that:- the items and the usage thereof which has been demonstrated before us, from the documents on records, clearly indicate that these items were consumed / used as components, spares or parts of the various machineries which were either fabricated and installed alongwith bought out items for setting up of the refinery. - Decision in the case of Essar Steel Ltd. [2008 (12) TMI 566 - CESTAT, AHMEDABAD] followed - Credit allowed. As regards credit in respect of consumables such as enamels, paints, polyester resins, electrodes and chemicals - Held that:- Appellant has been able to demonstrate before us and also canvassed before the adjudicating authority that these items were essential items without which factory could not be set up and needed for maintenance due to substantial time taken for setting up the entire refinery. Since it is undisputed that these items were used in the factory premises for maintaining of the plant and machinery, fabrication of machinery, not having the stock of the said items cannot be a ground for denial of the Cenvat Credit the appellant. - Credit allowed. Demand of interest on Reversal of Cenvat Credit where assessee has accepted the credit is ineligible - Held that:- It is also undisputed that they have reversed the said amount. In our view, all the arguments made by the Ld. Counsel that interest cannot be charged, would not carry the case any further, as the Apex Court in the case of Indswift Laboratories Ltd. (2011 (2) TMI 6 - Supreme Court), was specifically interpreting the provisions of Rule 14 of the Cenvat Credit Rules, 2004 and held that even if the credit is taken and subsequently reversed, interest liability arises. Respectfully following the ratio laid down, we hold that the appellant is liable to pay the interest on the amount. Decided partly in favour of assessee. Issues Involved:1. Eligibility of Cenvat Credit on capital goods where the owner is different from the appellant.2. Denial of Cenvat Credit due to non-filing of intimation regarding receipt of capital goods.3. Denial of Cenvat Credit on original or extra copy of invoices.4. Denial of Cenvat Credit on goods not falling under specific chapters of the Central Excise Tariff Act.5. Denial of Cenvat Credit on consumables used during the installation/erection of the factory.6. Demand of interest on reversed Cenvat Credit.Issue-wise Analysis:1. Eligibility of Cenvat Credit on capital goods where the owner is different from the appellant:The adjudicating authority denied Cenvat Credit of Rs.20,61,57,657/- on the grounds that the invoices were in the name of Essar Projects Ltd., not the appellant. The appellant argued that the invoices indicated them as the consignee and that ownership is not a criterion for availing credit. The Tribunal found merit in the appellant's argument, referencing case laws like Jewel Brushes Pvt. Ltd. and others, and concluded that the credit should be allowed since the goods were received, consumed, and duty-paid. The demand was set aside, and the appeal was allowed.2. Denial of Cenvat Credit due to non-filing of intimation regarding receipt of capital goods:The adjudicating authority denied Cenvat Credit of Rs.38,74,887/- due to non-submission of intimation to the Jurisdictional Superintendent. The appellant contended that the goods were received and used in setting up the refinery, and non-filing of the declaration was an inadvertent procedural lapse. The Tribunal agreed, citing the Madras High Court's decision in Kothari Sugars & Chemicals, and held that procedural lapses should not deny substantive benefits. The credit was allowed.3. Denial of Cenvat Credit on original or extra copy of invoices:The adjudicating authority denied Cenvat Credit of Rs.6,68,773/- and Rs.2,34,351/- because the credit was availed on original or extra copies of invoices. The appellant argued that there was no dispute regarding the duty-paid nature of the goods. The Tribunal, referencing decisions by the Gujarat High Court in Steelco Gujarat Ltd. and Vimal Enterprises, found that credit should be allowed as long as the goods were received and consumed. The credit was allowed.4. Denial of Cenvat Credit on goods not falling under specific chapters of the Central Excise Tariff Act:The adjudicating authority denied Cenvat Credit of Rs.1,95,84,057/- and Rs.25,33,813/- on goods not falling under Chapters 84, 85, and 90. The appellant argued that these items were used as components or spares in the refinery's machinery. The Tribunal found that the items were indeed used in the manufacturing process and referenced the decision in Essar Steel Ltd. The credit was allowed.5. Denial of Cenvat Credit on consumables used during the installation/erection of the factory:The adjudicating authority denied Cenvat Credit of Rs.94,00,484/- on consumables like enamels, paints, and chemicals used during the refinery's construction. The appellant argued that these were essential for setting up the factory. The Tribunal agreed, noting that these items were necessary for maintaining the plant and machinery. The credit was allowed.6. Demand of interest on reversed Cenvat Credit:The adjudicating authority demanded interest on Rs.39,02,938/- reversed by the appellant. The appellant argued that interest should not be charged as the factory was not operational when the credit was availed. The Tribunal, referencing the Supreme Court's decision in Indswift Laboratories Ltd., held that interest is payable even if the credit is reversed. The demand for interest was upheld.Conclusion:The Tribunal allowed the appeal regarding the eligibility of Cenvat Credit on various items, set aside the penalty, and upheld the demand for interest on the reversed credit. The appeal was disposed of with consequential relief as indicated.