2017 (5) TMI 137 - AT - Central Excise

Tribunal rules in favor of appellants on CENVAT credit denial, supporting integrated units.

M/s. Dakshin Foundry Pvt. Ltd. Versus Commissioner of Central Excise, Customs and Service Tax, Bangalore

M/s. Dakshin Foundry Pvt. Ltd. Versus Commissioner of Central Excise, Customs and Service Tax, Bangalore - TMI Issues:- Denial of CENVAT credit on security service and capital goods.- Applicability of Rule 4(5) regarding job work.- Integration of multiple units under the same manufacturer.- Correctness of availing 100% credit on capital goods.- Entitlement to interest on credit availed.Analysis:The appellants filed appeals against the Commissioner's order dismissing their appeals and upholding the Order-in-Original, focusing on the denial of CENVAT credit on security services and capital goods. The case involved the manufacture of ferrous castings and patterns, with a main unit and a supporting unit undertaking intermediary processes. The appellants did not register the supporting unit under Central Excise provisions as it was integrated with the main unit. The dispute arose when the department objected to the CENVAT credit availed on security services and capital goods, leading to show-cause notices and subsequent confirmation of demand by the adjudicating authority. The Commissioner rejected the appeals, prompting the current appeals before the Tribunal.The appellants argued that the denial of CENVAT credit was unjustified, emphasizing that the supporting unit was an extension of the main unit and not a separate entity. They contended that the security services and capital goods were used in an integrated manner across both units, making the denial of credit unsustainable. Additionally, they challenged the application of Rule 4(5) regarding job work, asserting that the supporting unit was not a job worker. The appellants also defended their decision to avail 100% credit on capital goods, stating that they had not fully utilized the credit in the first year and were entitled to claim it in subsequent years.In contrast, the department supported the findings of the impugned orders, maintaining their stance on the denial of CENVAT credit. However, after evaluating the submissions, case records, and legal precedents cited by the appellants, the Tribunal found in favor of the appellants. The Tribunal noted that both units belonged to the same manufacturer and were integrated, with processes carried out in the supporting unit and goods returned to the main unit for clearance. The Tribunal deemed the denial of CENVAT credit on security services and capital goods as unsustainable, citing relevant judgments. It also rejected the argument against availing 100% credit on capital goods, emphasizing the appellants' entitlement to claim credit in subsequent financial years.Consequently, the Tribunal set aside the impugned orders, allowing the appeals of the appellants and providing for any consequential relief. The judgment highlighted the integration of units, the permissible use of CENVAT credit, and the entitlement of manufacturers to claim credit in compliance with the law.