By TIOL News Service

MUMBAI, DEC 05, 2013: BY using angles, channels, etc. the appellant fabricated a structure to support the reactors which they were using in the manufacture of excisable goods. They paid excise duty on the said structure under CETH No. 8419 90 90 as machinery and took credit of the duty so paid. They also reflected the same in the monthly ER-1 returns.

The department wrote a letter to the appellant vide letter dated 09/08/2007 pointing out that the appellant is not eligible for CENVAT credit on goods which are not covered under the definition of ‘capital goods' and, therefore, directed the appellant to reverse the credit taken during the period November, 2006 to July, 2007.

The appellant reversed the credit in August 2007.

Thereafter, the appellant again took credit of the credit under the category of ‘inputs'.

Now, that was sacrilege. Proceedings were initiated by the jurisdictional authorities for recovery of the CENVAT credit availed of Rs.4,53,521/- and this demand was confirmed by the adjudicating authority and also upheld by the Commissioner(A).

So, the appellant is before the CESTAT.

It is submitted that re-taking of the credit was mentioned in the ER-1 returns filed from September, 2007 onwards and since the transactions were known to the department, SCN issued in November, 2010seeking reversal of credit is time barred. On this ground, it is pleaded that stay be granted.

The Revenue representative reiterated the findings of the lower authorities.

The Bench observed -

"5. I have carefully considered the submissions made by both the sides. Initially the appellant took credit on MS angles and channels under the category of capital goods, even though, by no stretch of imagination, angles and channels can be considered as capital goods. When the department pointed out this, the appellant reversed the credit. After they reversed the credit, the appellant once again took re-credit of the duty paid, under the guise of inputs, and thereafter, when iron and steel products were fabricated into platform, they paid duty on the said platform under the category of machinery under CETH NO. 8419 90 90. Prima facie, the appellant has resorted to a camouflage in respect of their activities. By no stretch of imagination MS channels, angles, platforms, structures etc. can be considered as machinery under CETH 8419. Machinery is something used for manufacture or processing or working upon some materials. The platform does not do any of these and, therefore, from a common sense perception, platform is not machinery but it is only a supporting structure for the machinery. This Tribunal in the case of Vandana Global Ltd. - (2010-TIOL-624-CESTAT-DEL-LB) has held that cement and steel items used for foundation or building supporting structures for capital goods cannot be considered as capital goods or parts or accessories of capital goods. Similarly, in the case of Saraswati Sugar Mills - (2011-TIOL-73-SC-CX) the Hon'ble Apex Court has held that iron and steel structures manufactured and captively used cannot be considered as capital goods eligible for Modvat/Cenvat credit. The ratio of these decisions applies to the facts of the present case. In spite of these clear facts, the appellant chose to declare the structure as machinery and sought to avail ineligible credit. Subsequent to the reversal, the appellant once again resorted to taking of the credit as inputs. This conduct of the appellant clearly manifest complete disregard for the law and to somehow avail CENVAT Credit whether the same is entitled or not. Therefore, I am of the prima facie view that the appellant has not made out any case for grant of stay."

Noting that the appellant had not pleaded any financial hardship and the balance of convenience is in favour of Revenue, the CESTAT directed the appellant to make pre-deposit of the entire amount of CENVAT credit taken along with interest thereon and report compliance for obtaining Stay.

(See 2013-TIOL-1811-CESTAT-MUM)