2024 (1) TMI 393 - AT - Central Excise

CESTAT allows CENVAT credit claim on steel plates for factory equipment repair under rule 2(k) after procedural oversight

CESTAT Mumbai set aside the original authority's order denying CENVAT credit on steel plates used for repair and maintenance of factory equipment. The ... Recovery of CENVAT Credit alongwith interest and penalty - steel plates of various grades utilized by the appellant for repair, maintenance and replacement of ‘acid tank’, ‘annealing furnace’ and ‘buckets’ in the factory of manufacture - HELD THAT:- The availment of credit of duty paid on steel plates of various grades on the finding that the definition of ‘capital goods’ in rule 2(a) of CENVAT Credit Rules, 2004 was not allowed for non-conformity with that and that their alternative plea for consideration of eligibility as ‘inputs’ in terms of rule 2(k) of CENVAT Credit Rules, 2004 was not to be entertained by recourse to procedural lacuna indicated in the order. On the other hand, the first appellate authority had rejected the appeal solely by relying upon the decision of the Larger Bench of the Tribunal on the ground that the said decision covered the issue in dispute. On a perusal of rule 2(k) of CENVAT Credit Rules, 2004, we find that the definition therein is intended for such goods as are entitled to availment of credit in terms of rule 3 of CENVAT Credit Rules, 2004; ‘steel plates’ do not come within that definition and, consequently, are not ‘capital goods’ but, nonetheless, the installation of ‘capital goods’ within the factory of manufacture by or on behalf of assessee is permissible towards availment of CENVAT credit on the parts deployed therein to qualify as ‘inputs’ under rule 2(k) of CENVAT Credit Rules, 2004. That claim of the appellant herein has been discarded by the original authority on procedural grounds and had not been considered by the first appellate authority at all. The first appellate authority has failed to subject the order of the original authority, on the discarding of claim for coverage as ‘inputs’ for availment of CENVAT credit on the part of the appellant, to scrutiny. This is an aspect that requires consideration by the original authority. The impugned order set aside and matter remanded back to the original authority to determine the claim of the appellant for coverage of credit within the meaning of rule 2(k) of CENVAT Credit Rules, 2004. Issues involved:The appeal involves the rejection of the appellant's claim for CENVAT credit on 'steel plates' used for repair, maintenance, and replacement of equipment in the factory, along with the imposition of penalty under the Central Excise Act, 1944.Detailed Summary:1. Issue 1 - Eligibility of CENVAT credit on 'steel plates' for repair and maintenance:The appellant, a manufacturer of various sheets and coils, availed credit on 'steel plates' used for repair and maintenance of equipment between 2006 and 2010. The original authority rejected the claim, stating repair activities do not qualify as per CENVAT Credit Rules, 2004. The appellant argued that these could be considered as 'inputs' under the rules, citing precedents from High Courts.2. Issue 2 - Interpretation of precedents and applicability to the case:The appellant referenced decisions from High Courts and the Supreme Court to support their claim for credit on 'steel plates'. The first appellate authority relied on a Tribunal decision, which the High Court later deemed incorrect. The appellant contended that the Tribunal's decision was based on an incorrect reading of the law laid down by the Supreme Court.3. Issue 3 - Examination of eligibility under CENVAT Credit Rules, 2004:Upon review, it was found that the original authority did not allow credit on 'steel plates' based on procedural grounds, and the first appellate authority upheld this decision without considering the appellant's arguments. The Tribunal concluded that the 'steel plates' could qualify as 'inputs' under the rules, contrary to the lower authorities' findings.4. Decision and Remand:The Tribunal set aside the first appellate authority's order and remanded the matter to the original authority to determine the appellant's claim for CENVAT credit on 'steel plates' as 'inputs' under the CENVAT Credit Rules, 2004. The decision was pronounced in open court on 09/01/2024.