2015 (8) TMI 445 - AT - Central Excise

Denial of CENVAT credit for old parts upheld due to inefficiency and lack of evidence

The court upheld the decision to deny CENVAT credit on old machinery parts amounting to &8377;23,85,798/-, as they were deemed unsuitable for use in ... Denial of CENVAT Credit - adjudicating authority held that the machineries were very old i.e. purchased by M/s. Gokulanand Texturisers in the year 1998 and therefore, it is no longer remained in a position of being reused as fresh parts (inputs) for manufacture of new machines - Held that:- Appellant received the goods accompanied with the Central Excise invoices and availed CENVAT credit - It has been alleged in the show cause notice that the appellant failed to produce any job card or any other private record to establish the use of these items in the final products. Learned Advocate during the course of hearing drew the attention of the bench only RG-23 Part-I register that the appellant have used the goods in question in and waste and scraps. Admittedly, the appellant received old and used machinery, apparently, which cannot be used in the final products. The appellant failed to produce any evidence of use of the items - No reason to interfere with the order of Commissioner (Appeals) - Decided against assessee. Issues: Eligibility of CENVAT credit on old machinery parts.Analysis:1. The case involved a dispute regarding the eligibility of CENVAT credit amounting to &8377;23,85,798/- availed on old draw texturising machine parts received in dismantled condition. The appellant, engaged in manufacturing textile machinery, claimed the credit on the basis of invoices issued by the supplier. The adjudicating authority and Commissioner (Appeals) held that the old machinery parts were not suitable for reuse in the manufacture of new machines, denying the credit and imposing penalties.2. The appellant argued that they received duty-paid inputs with proper invoices and utilized them in manufacturing textile machinery. The appellant contended that the authorities erred in not considering the actual use of the machinery parts, focusing instead on their dismantled state. The appellant highlighted the absence of any dispute regarding the use of the machinery parts and the failure to consider relevant registers documenting their use.3. The revenue representative supported the findings of the Commissioner (Appeals), emphasizing that the appellant received old, used, and dismantled parts as inputs for new machinery. The revenue contended that the appellant failed to provide sufficient evidence, such as job cards or private records, to establish the utilization of the old machinery parts in the final products. The revenue argued that CENVAT credit cannot be claimed on waste or scrap unsuitable for manufacturing final products.4. Upon review, the judge observed that the appellant received the machinery parts with proper invoices and claimed CENVAT credit. The judge noted the allegations that the appellant did not produce documentary evidence of the utilization of the items in question. The judge considered the definition of inputs under the Cenvat Credit Rules, emphasizing that all goods used in the factory for manufacturing final products qualify as inputs. The main issue revolved around whether the old machinery parts could be effectively used in manufacturing final products.5. The judge referenced the order of the Commissioner (Appeals) which highlighted the age and condition of the machinery parts, indicating that using such old parts could impact efficiency and durability, leading to frequent repairs. The judge concurred with the findings that the machinery parts were essentially waste and scrap, not suitable for manufacturing final products. The judge agreed that the appellant failed to provide adequate records demonstrating the utilization of the old parts, leading to the rejection of the appeal.6. Ultimately, the judge found no grounds to overturn the order of the Commissioner (Appeals) and rejected the appellant's appeal, upholding the decision to deny the CENVAT credit on the old machinery parts due to their unsuitability for use in manufacturing final products.