Modvat Credit Can Be Availed On Steel Plates, M.S. Channels Used In Fabrication Of Chimneys For Diesel Generating Set: CESTAT
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of P.K. Choudhary (Judicial Member) and P.V. Subba Rao (Technical Member) has ruled that the assessee is entitled to avail of modvat credit on steel plates and M.S. channels used in the fabrication of chimneys for the diesel generating set by treating them as capital...
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) consisting of P.K. Choudhary (Judicial Member) and P.V. Subba Rao (Technical Member) has ruled that the assessee is entitled to avail of modvat credit on steel plates and M.S. channels used in the fabrication of chimneys for the diesel generating set by treating them as capital goods.
The appellant/assessee is in the business of manufacturing Silico Manganese, classifiable under Chapter Heading 72 of the First Schedule to the Central Excise Tariff Act, 1985. The appellee has been availing Cenvat Credit on various inputs, capital goods, and input services.
A Show Cause Notice was issued alleging that the Appellant had availed credit during the period from September 2010 to July 2012 to the tune of Rs. 1,25,71,873 on various capital goods which appear to be not eligible for credit under the definition of capital goods.
The Appellant assailed the allegations contained in the Show Cause Notice. The appellant contended that they were entitled to take credit for the goods. The Appellant also filed a written submission at the time of the personal hearing before the adjudicating authority, along with details of the utilisation area, with a description and the main equipment to which it was related in the worksheet. The Commissioner of Central Excise passed the order and confirmed the demand as proposed in the Show Cause Notice and imposed an equal penalty.
The appellant contended that a Chartered Engineer's Certificate regarding the utilisation of various items has been filed. No finding has been given by the Commissioiner in respect of the Chartered Engineer's Certificate. The Chartered Engineer's Certificate indicates whether the various items were used in the factory and their purpose. When a chartered engineer has examined each and every disputed item and has considered its usage and its necessity, it cannot be questioned unless there is contra evidence.
The appellant submitted that the adjudicating authority has denied the Cenvat credit on the sole ground that the capital equipment in question is embedded in the earth and hence becomes immovable property. The Cenvat credit taken has been properly reflected in the monthly ER-1 returns. There is no column in the ER-1 to show the credits taken individually. The returns also do not call for invoice-wise details of the Cenvat credit available. Since the Cenvat Credit has been properly disclosed in the ER-1 return, the question of suppression does not arise. The appellant was under the bona fide belief that they were eligible for the Cenvat credit on the goods in question, and therefore the question of suppression does not arise.
The department contended that the appellant utilised Cenvat credit on steel items for laying foundations or making structures for the support of capital goods, and therefore, the appellant utilised Cenvat credit irregularly. The appellant failed to adduce any evidence that the details of the items of capital goods fabricated were declared in the ER-1 returns filed by the appellant. The drawings and designs of the capital goods claim to have been fabricated. The adjudicating authority has failed to ascertain the quantity of structural steel materials used for various items of capital goods as claimed to have been fabricated.
The CESTAT observed that the main ground for denying the credit as discussed in the impugned order is that the Appellant failed to furnish sufficient documentary evidence that the impugned items were used in the fabrication of capital goods, accessories, parts, or components. The Chartered Engineer's Certificate, though produced before both the authorities, has not been considered at all.
The court stated that when the Chartered Engineer's Certificate was produced before the adjudicating authority, it was incumbent on the authorities to either contradict the Chartered Engineer's Certificate or accept the same. In the absence of any contradictory certificates on record indicating otherwise that the inputs were used for machinery fabrication, the adjudicating authority's failure to consider the Certificate issued by the Chartered Engineer appears to be contrary to law.
"Receipt of goods and thereafter use for fabrication as per Chartered Engineer's Certificate is not contested, but contested only on a point that the inputs do not fall under the category of capital goods and hence are not eligible for Cenvat credit, will not support the case of the Revenue," the CESTAT while ruling in favour of the appellant said.
Case Title: M/s. Berry Alloys Limited Versus Commissioner of Central Tax
Citation: Excise Appeal No.23786 of 2014
Dated: 09.05.2022
Counsel For Appellant: Advocate R. Murlidhar
Counsel For Respondent: Authorized Representative Hanuma Prasad