Tribunal Upholds Appeal Allowing CENVAT Credit on Capital Goods

The Tribunal upheld the Commissioner (Appeal)'s decision to set aside the Order-in-Original, allowing the assessee's appeal regarding CENVAT credit availed on capital goods. The Tribunal determined that the iron and steel items were used in manufacturing capital goods for captive use in the factory, falling under an exemption notification. Consequently, the Tribunal dismissed the Revenue's appeal, citing precedents that favored the assessee's position.

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Issues:
Department's appeal against setting aside of Order-in-Original and allowance of assessee's appeal by Commissioner (Appeal) regarding CENVAT credit availed on capital goods.

Analysis:
The Department filed an appeal against the Commissioner (Appeal) setting aside the Order-in-Original, which confirmed the demand of CENVAT credit availed on capital goods by the assessee. The appellants, engaged in manufacturing Autoclaved Aerated Concrete Block, availed CENVAT credit of Rs. 2,27,54,792 on capital goods during scrutiny of ER 3 returns. The jurisdictional Central Excise Officer asked them to reverse the credit since they were availing exemption under Notification No. 08/2003-CE. Investigation revealed that certain steel items used by the appellants did not qualify as 'capital goods' under Rule 2(a) of the CENVAT credit Rules, 2004. A show cause notice was issued proposing recovery of Rs. 43,25,538 with interest and penalty. The adjudicating authority confirmed the demand and penalty. The assessee appealed, and the Commissioner accepted the appeal, leading to the Department's appeal.

The Revenue argued that the impugned order was unsustainable as the assessee availed credit on items not qualifying as inputs for capital goods manufacture under the exemption Notification. Referring to the definition of capital goods in Rule 2(a) of the CENVAT credit Rules, 2004, the Revenue contended that the items in question were not admissible for CENVAT credit. Citing the Apex Court case of Union of India Vs. Delhi Cloth and General Mills Co. ltd, the Revenue emphasized that goods must be marketable. On the contrary, the assessee's counsel defended the impugned order, citing settled Tribunal decisions favoring the assessee. The counsel argued that the iron and steel items were used in manufacturing capital goods for captive use in the factory, supported by various Tribunal decisions.

After considering submissions and cited decisions, the Tribunal found that the iron and steel items were used in manufacturing capital goods for captive use in the factory, exempted under Notification No. 67/95-CE. Citing the Tribunal decision in Ritesh Trade Fin Ltd. Vs. Commissioner of Central Excise, the Tribunal upheld the impugned order, dismissing the Revenue's appeal. The Tribunal noted that all decisions relied upon by the Commissioner (Appeal) favored the assessee, leading to the dismissal of the Revenue's appeal.

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