CENVAT credit on fabricated capital goods and curable invoice defects upheld where receipt and duty payment were established

CENVAT credit was found admissible on steel items used to fabricate a Surface Testing Bench because the bench fell within the relevant capital goods tariff entry, so the items could not be rejected merely for being used in fabrication. Credit was also upheld on MS items used for steel shots in shot blasting machines, as earlier decisions had already recognised such use as covered by the credit scheme. Credit on a diesel generator set was allowed despite the invoice naming another unit, because the generator was received at the appellant's factory, the transfer was endorsed, and the invoice defect was curable where duty payment and accounting were otherwise established.

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Issues: (i) Whether steel items used for making a Surface Testing Bench were eligible for CENVAT credit as capital goods; (ii) whether MS items used for steel shots in shot blasting machines were eligible for credit; (iii) whether credit on the diesel generator set could be denied because the invoice mentioned the name and address of a different unit.

Issue (i): Whether steel items used for making a Surface Testing Bench were eligible for CENVAT credit as capital goods.

Analysis: Surface Testing Bench is reflected in Chapter 90 of the Central Excise Tariff Act, 1985 under heading 90312000. Since the bench falls within the tariff entry for capital goods, the steel items used in its fabrication could not be treated as ineligible merely because they were not purchased as a finished machine.

Conclusion: Credit on the steel items used for making the Surface Testing Bench is admissible and the denial was unjustified.

Issue (ii): Whether MS items used for steel shots in shot blasting machines were eligible for credit.

Analysis: The issue was treated as settled by the earlier decisions relied upon by the appellant, which recognized admissibility of credit on steel shots used in or in relation to manufacture. The use of the items in shot blasting machinery brought them within the eligible credit regime.

Conclusion: Credit on the MS items used for steel shots is admissible.

Issue (iii): Whether credit on the diesel generator set could be denied because the invoice mentioned the name and address of a different unit.

Analysis: The invoice showed the generator in the name of another unit, but the generator was received in the appellant's factory and the transfer was endorsed on the invoice. Under Rule 9(2) of the CENVAT Credit Rules, 2004, where particulars in the invoice create doubt, the proper officer may allow credit if satisfied that duty payment and accounting are in order. As receipt of the generator and duty payment were not in dispute, the invoice defect was not a valid basis to deny credit.

Conclusion: Credit on the diesel generator set is admissible.

Final Conclusion: The disallowance of CENVAT credit on all disputed items was unsustainable, and the assessee was entitled to the relief claimed.

Ratio Decidendi: CENVAT credit cannot be denied on eligible capital goods or on the basis of a curable invoice defect where the receipt of goods and duty payment are established and the crediting authority is satisfied of proper accounting.

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