By TIOL News Service

MUMBAI, JAN 19, 2015: THE appellant is a manufacturer of enamel, paints, thinner and varnish. They procured Steatite Ceramics, used in the manufacture of paints, and took CENVAT Credit of duty paid on these goods.

Revenue was of the view that "Steatite Ceramic" falls under Tariff Heading 6804 and, therefore, the goods are capital goods in terms of the definition contained in rule 2(a)(A)(i) of the CCR, 2004 and the appellants are not entitled to take 100% CENVAT Credit in the first year.

Proceedings were initiated against the appellant and CENVAT Credit was denied to the extent of 50%, interest was demanded and penalty was also imposed.

As the lower authorities upheld the demand, the appellant is before the CESTAT.

After considering the submissions, the Bench observed -

"4. Although the appellant is not in dispute as these are not capital goods and they are entitled to take CENVAT Credit to the tune of 50% of duty paid in the first year as per Rule 4(b) of Cenvat Credit Rules, 2004. Therefore, for the first year availement of CENVAT Credit is restricted to 50% of the duty paid but the appellant is entitled to take the remaining 50% CENVAT Credit in the subsequent year. In the circumstance, at the most, interest for the intervening period was required to be demanded from the appellant. The adjudicating authority has directed the appellant to reverse the excess 50% of CENVAT Credit for the first year along with the interest and also imposed penalty which were not required. In these circumstances, I dispose of the appeal of the appellant by confirming the demand of interest for the intervening period and setting aside the demand of duty and penalty against the appellant."

The appeal was partly allowed with consequential relief.

(See 2015-TIOL-142-CESTAT-MUM)