2017 (1) TMI 1177 - AT - Central Excise

Tribunal Upholds Disallowance of Credit on Civil Construction Items & Interest Demand

The Tribunal dismissed the department's appeal, upholding the disallowance of credit on single leaf door and glazed view panel as specialized civil ... CENVAT credit - single leaf door - glazed view panel - Held that: - These items are used for packing unit and in my view are specialized civil construction items. In view thereof, I uphold the view taken by the Commissioner (Appeals) disallowing the credit availed on single leaf door and glazed view panel. Demand of interest on irregular credit availed - Held that: - The appellant has no case that the irregular credit was reversed. Therefore the prayer of appellant to set aside the interest demand on irregularly availed credit on single leaf door and glazed view panel is not tenable. Appeal disposed off - decided against assessee. Issues: Department's appeal against Order-in-Appeal allowing credit on MS items, disallowance of credit on single leaf door and glazed view panel, recovery of irregularly availed credit with interest, imposition of penalty, assessee's cross objections.Analysis:1. The department appealed against the Order-in-Appeal that allowed credit on MS items but disallowed credit on single leaf door and glazed view panel. The Commissioner (Appeals) disallowed credit on these specific items and upheld the recovery of irregularly availed credit along with interest, imposing a penalty of Rs. 3,00,000.2. The assessee, engaged in manufacturing bulk drugs, availed CENVAT Credit on various items including MS plates, sheets, joists, single leaf door, and glazed view panel. The department contended that the credit was inadmissible, leading to show cause notices for recovery of irregularly availed credit with interest and proposed penalties. The original authority disallowed the entire credit, confirmed the demand with interest, and imposed a penalty of Rs. 3,00,000. The Commissioner (Appeals) allowed credit on most items except single leaf door and glazed view panel.3. The department argued that the MS items were used mainly for repair and maintenance, making the credit inadmissible. Regarding the single leaf door and glazed view panel, they claimed these items were used in civil construction of the packing room, justifying the disallowance of credit.4. The assessee's counsel countered by explaining that the MS items were used for fabrication of capital goods like storage tanks and pipelines. They clarified that the single leaf door and glazed view panel were part of the packing unit, not civil construction, and were essential for maintaining Good Manufacturing Practices to prevent contamination. The counsel also argued that the credit on these items was not utilized, questioning the interest demand upheld by the Commissioner (Appeals).5. The Commissioner (Appeals) analyzed the item-wise usage of the MS items and found them eligible for credit based on their deployment for fabricating capital goods. However, the credit on single leaf door and glazed view panel was disallowed as they were considered specialized civil construction items for preventing contamination in the packing unit. The Commissioner upheld the disallowance of credit on these items and rejected the plea to set aside the interest demand on irregularly availed credit.6. Ultimately, the Tribunal dismissed the department's appeals and disposed of the assessee's cross objections accordingly. The decision upheld the disallowance of credit on the single leaf door and glazed view panel, considering them specialized civil construction items, and rejected the plea to set aside the interest demand on irregularly availed credit.