CA Urvashi Porwal
In the case of C.C.E. Raipur Vs. M/s. Bharat Aluminum Co. Ltd., it was held that the assessee should produce corroborative evidence to establish that the inputs/Capital goods are used in the process of manufacturing and accordingly the CENVAT credit should be allowed.
Facts of the Case
The brief facts of the case are that the Respondent assessee are engaged in the manufacture of aluminum and articles thereof liable to Central Excise duty. They are availing credit of duty on various inputs and capital goods in terms of Cenvat Credit Rules, 2001/2002. The dispute arose regarding respondent’s eligibility for credit on various items like MS items, bars, wires, ropes, angles, channels, conductors, cathode shell assembly, transformer oil, gas, oil seed.. etc. Proceedings are initiated against the Respondent to deny and recover the credit taken on these various items. The Original Authority vide his order dated 31.07.2006 denied credit on all the items except on Burner/Disc Clamp, Optical fiber cables, Alumina Silo and MS Pipes. The Original Authority found that the various items on which the Respondent claimed are not proved to be covered by the definition of capital goods; as components, spares and accessories, and hence, they are not entitled for the credit as capital goods. He imposed penalties also on the Respondent. On appeal the Commissioner (Appeals) vide the impugned order set aside the original order and allowed the appeal in full.
Aggrieved by this order, the Revenue is in appeal.
Contentions of the Revenue
The Revenue contended the following:
a) The various impugned goods are classifiable under chapter 32, 40, 72 and 73 of the Tariff, and as such, are not capital goods for credit purpose. Though, the Respondent filed details of usage of various goods on which credit has been claimed, certain usage as part of process equipments are not giving any details and the Commissioner (Appeals) should not have allowed credit on these items.
b) The impugned goods have no role in the functioning of any machinery and they cannot be considered as inputs also for the manufacture of final product.
c) The Respondent failed to produce corroborative evidence regarding the usage of impugned items.
d) To become component or the spare part or an accessory it is essential that the impugned goods should be directly fitted into or for used in the capital goods it is for the Respondent to satisfy such usage with clear supportive evidence.
Contentions of Assessee
The assessee contented the following:-
a) The classification of impugned goods is not relevant to decide their credit availability as components, spares or accessories for identified capital goods.
b) They have submitted item wise detailed chart giving the nature of part/ accessories and its use in the identified capital goods. Reliance was placed on Boards Circular dated 3.4.2000 in support of their claim for credit on components, spares or accessories.
c) The department has not contested the usage chart submitted by them specifically item wise.
d) As an alternate plea, the credit on various impugned items is admissible as inputs. There are certain specific items like Oxygen Gas, Filter Clothes, Fleuron Gas etc. which are specifically coming under the category of inputs. No finding has been given by the Original Authority in rejecting their claim.
e) The demand was time barred in respect of the first SCN as there is no suppression or fraud on their part.
Held by Hon’ble CESTAT
The Hon’ble CESTAT stated that the point for decision is the Respondent’s eligibility on various items listed in the proceedings before the lower authority for availing credit either as capital goods or as inputs. The Hon’ble CESTAT found that though full defense submission by the Respondent was recorded by the Original Authority, the conclusions are very cryptic and brief. The original authority observed that as per the details given by the Respondent assessee none of the impugned goods (except 4) will qualify for credit under the category of components, spares and accessories. No reason whatsoever has been recorded to arrive at such findings. The Hon’ble CESTAT also found the Ld. Commissioner (Appeals) also did not give elaborate findings on the detailed chart submitted by the Respondent assessee. Even though, it may not be necessary to give finding on each one of the hundreds of items, it is at least required to combine similar items of usage in groups to ascertain their nature of usage and to give a finding whether they are covered by the eligibility criteria for credit. Even such attempt has not been made. The Ld. Commissioner (Appeals) relied on the chart submitted by the Respondent assessee and concluded that there is no dispute that the impugned items have been used in relation to production and processing of goods within the factory premises, and hence, allowed the credit on these items. It is the case of the Respondent assessee that they can establish for each one of the items their usage in particular capital goods or as inputs (as in the case of gas etc.). This can be done by giving clear classification of such capital goods in which the impugned goods are used along with the supporting evidence. It is a fact that such details have not been made available in the chart furnished before the lower authorities. Further, it is also seen that the usage against many of the items is very general like “parts, accessories, spares of process equipment”. The nature of process equipment is not identified. In such situation, it would not be possible to arrive at a decision regarding eligibility of the impugned items claimed to have been used as such parts.
Regarding some of the impugned items having been used for repair and maintenance, the Respondent assessee submitted that these items are also rightly eligible for credit as items used in replacement repair will necessarily be considered as spares. The Revenue contended that each one of the impugned items should be shown to have been used for a particular specified capital goods or as inputs with clear supportive evidence. In the absence of such claim no credit can be allowed. Accordingly, the present appeal can be disposed of by remanding the matter to the original authority to examine afresh the claims made by the Respondent assessee which will be supported by evidence of classification of various capital goods into which the impugned goods are purportedly used as parts and components and the use of inputs as such with supportive evidence.
In view of the above discussion and analysis, the impugned order is set aside, and the matter is remanded to the Original Authority to decide the eligibility of various items for cenvat credit either as capital goods or as inputs in terms of the observations made herein above. The Respondent assessee shall be given adequate opportunity to present their case with supportive evidence before passing such order. The appeal is accordingly allowed by way of remand. The cross objection also stands disposed of.