Appellant allowed Cenvat Credit for machinery fabrication; penalty deemed not maintainable.

The appellant was deemed entitled to avail Cenvat Credit on various items used in the fabrication of machinery for sugar manufacturing. The Tribunal relied on previous judgments and the appellant's evidence to conclude that the credit was allowable under Rule-2(k) for goods used in the manufacture of capital goods. The penalty imposed on the appellant company and Managing Director was deemed not maintainable, and the appeal was allowed, overturning the previous order and pronouncing the decision in open court on 13/02/2019.

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Issues involved:
- Entitlement to avail Cenvat Credit on various items used in fabrication of machinery for sugar manufacturing.

Analysis:

The judgment revolves around the issue of whether the appellant is entitled to avail Cenvat Credit amounting to Rs. 4,29,33,132 on various items used in the fabrication of new machinery and parts for the manufacture of sugar. The items in question included H.R. Plates, M.S. Sheet, M.S. Plate, M.S. Angle, M.S. Channel, C.R. Coil, S.S. Flat, Chequered Plate, M.S. Square, C.R. Strips, M.S. Girder, C.I. Casting, Rails, and Welding Electrodes. The appellant had utilized these inputs for the fabrication of machines such as Cane Unloader, various Pumps, Pipelines, Cane Carrier, Bagasse Carrier, parts of Boiler, Pan, Evaporator, Sugar Grader, among others. The Cenvat Credit was availed during the period from January 2007 to June 2007. The Revenue contended that the appellant was not entitled to avail the credit, leading to proceedings and the imposition of a demand and penalty. However, the appellant provided evidence that the inputs were indeed used for the fabrication of machinery and parts, supported by a Certificate from the Technical Person of their factory and drawings of the fabricated items.

The Tribunal noted that the issue had been previously addressed in the appellant's own case through a Final Order dated 07/12/2017. In that order, it was established that the items in question, including Welding Electrodes, MS electrodes, MS plate, Shape, and Section, were predominantly used in the fabrication of Capital Goods. The appellant had submitted Annexure-A explaining the item-wise usage, which was not found to be untrue by the authorities. The definition of inputs under Rule-2(k) along with Explanation-2 includes goods used in the manufacture of capital goods further utilized in the manufacturer's factory. Therefore, the Cenvat credit was deemed allowable. The Tribunal relied on previous judgments and concluded that the appellant was entitled to the credit on the items in question. Consequently, the penalty on the appellant company and Managing Director was deemed not maintainable.

In light of the findings from the previous Final Order dated 07/12/2017, the Tribunal set aside the impugned order and allowed the appeal, pronouncing the decision in open court on 13/02/2019.

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