2022 (2) TMI 451 - AT - Central Excise

Tribunal remands case on cenvat credit denial for Captive Power Plant, emphasizes precedents and user test principle. Penalty set aside.

M/s. Chettinad Cement Corporation Ltd. Versus Commissioner of GST & Central Excise, Madurai

The Tribunal remanded the case concerning the denial of cenvat credit on capital goods used for a Captive Power Plant, emphasizing the applicability of ... CENVAT Credit - capital goods - items used in the maintenance of captive power plant - denial of credit on the ground that Captive Power Plant (CPP) was a turnkey project which was not excisable goods and therefore not covered within the definition of “capital goods” - denial of credit also on the ground that CPP generates electricity which is not an excisable product and therefore no credit is eligible on capital goods exclusively used for generation of electricity - HELD THAT:- The issue is with regard to the credit availed under the category of ‘capital goods’ or items which were used for repair and maintenance of the captive power plant intended for generation of electricity. Tribunal for different periods in CHETTINAD CEMENT CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE (TRICHY) , COMMISSIONER OF CENTRAL EXCISE, LTU (CHENNAI) [2016 (12) TMI 218 - CESTAT, CHENNAI] and M/S. MADRAS CEMENTS LTD VERSUS CCE, TRIICHY [2017 (1) TMI 1589 - CESTAT CHENNAI] had remanded the matter to the adjudicating authority to reconsider the issue on the basis of decisions cited. The Division Bench had set aside the penalty while remanding the matter. Following the decisions of the Tribunal in the appellant’s own case for different periods, the matter requires to be remanded to the adjudicating authority who is directed to conduct de novo adjudication and consider the eligibility of credit on the basis of principles laid down in the decisions cited above. Taking note of the fact that the issue is interpretational and appellant has not done any deliberate act to evade duty, the penalty requires to be set aside. Appeal is partly allowed by remand to the adjudicating authority. Issues:1. Denial of cenvat credit on capital goods used for maintenance of a Captive Power Plant.2. Classification of items under the definition of 'capital goods.'3. Interpretation of whether Captive Power Plant is excisable goods.4. Eligibility of credit based on user test.5. Consideration of settled decisions by the Tribunal.6. Imposition of penalty for evasion of duty.Analysis:The case involved the appellants, engaged in cement manufacturing, availing cenvat credit on inputs and capital goods, including items used in the maintenance of a Captive Power Plant. The issue revolved around the denial of cenvat credit on capital goods used for the power plant, with show cause notices alleging that the plant was not excisable goods and electricity generation did not qualify for credit. The original authority and Commissioner (Appeals) upheld the demand, leading to the appeals.The appellant's consultant argued that the items in question were spares and components of capital goods, falling within the definition of 'capital goods' under Rule 2(a) of CCR 2004. It was contended that the denial of credit based on the power plant being part of a turnkey project was incorrect, citing precedents and the user test principle from previous judgments.The consultant highlighted that similar issues were considered by the Tribunal for different periods and remanded for reevaluation based on settled decisions from various cases. The Tribunal had previously set aside penalties in such matters, considering them interpretational without deliberate evasion of duty.After hearing both sides, the Tribunal decided to remand the matter to the adjudicating authority for reconsideration based on the principles from the cited decisions. The penalty was set aside due to the interpretational nature of the issue and the lack of intentional evasion. The impugned order was set aside, and the appeal was partly allowed by remanding the case for de novo adjudication.In conclusion, the Tribunal's decision emphasized the importance of considering established legal principles and precedents in determining the eligibility of cenvat credit on capital goods used for maintenance of a Captive Power Plant, while also highlighting the need to set aside penalties in cases of interpretational issues without deliberate evasion of duty.