CESTAT Allows Cenvat Credit On The Capital Goods

The appellant is engaged in the manufacturing of RCC pipes, taxable under chapter heading no. 68109990 of the CETA. The appellant had availed Cenvat credit on receipt of capital goods during the period from April to June 2017. The appellant has also removed some of the capital goods on payment of duty. As per the returns, the appellant had reflected the transaction of taking of Cenvat credit and also utilisation/reversal in part, on the removal of capital goods. Further, as per the ER-1 Returns, for the period April 2017 to June 2017, there was no production nor any clearance.

It appeared to the revenue that the appellant was clearing their finished goods, i.e., RCC pipes. The goods were cleared for the eligible project being the "Khan River Diversion Project" of the Water Resources Department, Government of Madhya Pradesh. Thus, the appellant was entitled to an exemption.

It appeared to revenue that, as per Rule 6(4) of CCR, the appellant could not have taken the Cenvat credit on the capital goods. Rule 6(4) provides that no Cenvat credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services other than final products. The appellant does not fall under the exclusion clause, where exemption is granted based upon the value or quantity of clearance made in a financial year under any notification. Accordingly, a show cause notice was issued, proposing to demand Cenvat credit along with interest and a penalty.

The appellant preferred to appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal in part by confirming the demand for Cenvat credit with interest. However, the penalty was reduced.

The appellant contended that the show cause notice was misconceived as the finished products manufactured by the appellant were not exempt. The finished products were dutiable at the rate of 10% as per CTH 68109990 under the Central Excise Tariff Act. Thus, the finished product of the appellant was taxable in the normal course. For supplies made for specific projects under Notification No. 12/2012–CE, an exemption is available. The appellant has rightly taken the Cenvat credit.

The appellant contended that there was no utilisation of Cenvat credit for the removal of the finished goods. The appellant has utilised or reversed Cenvat credit for payment of duty on removal of capital goods. Thus, it amounts to a reversal of the Cenvat credit taken by the appellant.

The CESTAT held that the show cause notice was misconceived and that the appellant had rightly taken Cenvat credit on the capital goods.

Case Title: M/s K K Spun India Ltd. Versus Commissioner of Central Excise Customs and Service Tax, Indore

Citation: Excise Appeal No. 51293 of 2019

Dated: 12.07.2022

Counsel For Appellant: Advocate Kamal Jeet Singh

Counsel For Respondent: Authorised Representative Tamanna Alam

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