Credit admissibility on inputs used in errection of capital goods captively used in factory.

PJ/CASE LAW/2015-16/2909

Case:- TRACTOR ENGINEERS LTD. VERSUS COMMISSIONER OF C. EX. & CUSTOMS, PUNE

Citation:- 2015 (325) E.L.T. 890 (Tri. - Mumbai)

Brief facts:-This appeal is directed against Order-in-Appeal No. PI/VSK/260/2009, dated 9-12-2009 passed by the Commissioner (Appeals), Central Excise, Pune-I, wherein ld. Commissioner (Appeals) upheld the demand of Cenvat credit which was already paid by the appellant, demanded interest under Rule 14 of Central Excise Rules, 2002 and rejected the appeal by denying the waiver of penalty of equal amount.
The fact of the case is that appellant M/s. Tractor Engineers Limited purchased inputs which was used in the manufacture of furnace during factory of the appellant through contractor M/s. Bharat Gears Ltd. M/s. Bharat Gears Ltd. processed input provided by the various parties on behalf of the vendor in the construction of the furnace in the factory of the appellant. The Revenue proposed denial of Cenvat credit on the ground that furnace manager erected and installed in the factory of the appellant, no excise duty was paid on that, therefore, Cenvat credit is not admissible. The show cause notice was issued dated 30-4-2009 which was culminated into adjudicating order wherein the adjudicating authority confirmed demand of Rs. 2,96,017/- imposed of equal amount of penalty however the dropped the demand of interest. Aggrieved by the said order appellant filed appeal before the Commissioner (Appeals) only for waiver of penalty as they had paid Cenvat amount adjudged by the adjudicating authority. Ld. Commissioner not only rejected their appeal for waiver of penalty but also demanded interest under Rule 14 of Central Excise Rules. Aggrieved by the said order appellant is before Tribunal.

Appellant’s contention:- None appeared on behalf of the appellant nor there is any request for adjournment. Since issue lies in narrow compass, they proceed to decide the appeal on merit.

Respondent’s contention:- Shri H.N. Dixit, ld. Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that once the demand stand confirmed penalty cannot be waived. He relied upon judgments in the following cases :
(a) Union of India v. Ind-Swift Laboratories Ltd. [2011 (265)E.L.T.3 (S.C.)].
(b) Balmer Lawries & Co. Ltd. v. Commissioner of Central Excise, Belapur [2014 (301)E.L.T.573 (Tri. - Mum).]

Reasoning of judgment:- They have carefully considered the submission made by ld. AR and perused the record.
The present appeal is only for waiver of penalty and interest. As regard Cenvat credit disputed by the Revenue, the appellant had deposited admittedly and same is not under context. The appellant have taken credit on the input which was used in the manufacture of erection and installation of the furnace within the factory of the appellant. Revenue denied the Cenvat credit only on the ground that no duty was paid on the furnace either by the appellant or contractor, i.e., M/s. Bharat Gears Ltd., therefore, credit for input used for manufacture of erection and installation of the furnace is not admissible. They do not agree with this contention of the Revenue for the reason that the furnace is specified capital goods as per the definition provided under Cenvat Credit Rules, 2002. Input on which Cenvat credit was availed were indeed used in manufacture of erection and installation of the furnace. In terms of Notification No. 67/1995-C.E., dated 16-3-1995 input includes in the goods used in the manufacture of capital goods and if such capital goods used within the factory for manufacture of dutiable goods the furnace was exempted under Notification No. 67/1995 but input used in manufacture of such furnace is clearly covered under the definition of input therefore, the credit on the input used in the manufacture of furnace is admissible. However appellant has not disputed the denial of Cenvat credit and paid the said amount admittedly and not contested. In view of the their above observations Cenvat credit was otherwise admissible, penalty should not have not been imposed therefore, said aside the penalty. As regard the interest demanded by the ld. Commissioner (Appeals) in his order, they find that the adjudicating authority in his order explicitly dropped the demand of interest against which Revenue has not filed any appeal before the Commissioner (Appeals) therefore, the said portion related to interest of the order attained finality and since no appeal made by the Revenue ld. Commissioner (Appeals) should not have passed any order in respect of interest. For this reason the interest demanded by the Commissioner (Appeals) in his order is hereby dropped. It is made clear that since the appellant have not contested demand of Cenvat credit which was paid by them suo motu without contest the same stand confirmed. The appeal is allowed in above terms.

Decision:- Appeal allowed.

Comment:- The essence of the case is that the cenvat credit of inputs used in the manufacture of capital goods that are used in the factory is clearly admissible even when no excise duty is being paid on the manufacture of such capital goods in view of exemption notification no. 67/1995-CE for captive consumption as far as the said capital goods are used in the manufacture of dutiable final products. When the demand of cenvat credit itself is not sustainable, although it is not contested, the question of imposing penalty does not arise at all. Furthermore, as Revenue did not filed any appeal for imposition of interest, matter relating to interest having attained finality, no order for its levy could have been passed by Commissioner Appeals. Consequently, the interest and penalty were set aside. As demand of cenvat credit denial was not contested, the same was upheld.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2909

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