By TIOL News Service

MUMBAI, NOV 16, 2015: THE appellant purchased inputs and used them in the manufacture of furnace in the factory through contractor M/s. Bharat Gears Ltd. Revenue proposed denial of CENVAT Credit on the ground that in respect of the furnace manufactured, erected and installed in the factory of the appellant, no excise duty was paid and, therefore, CENVAT credit is not admissible.

The adjudicating authority confirmed the demand of Rs.2,96,017/- and imposed penalty of equal amount. He,however, dropped the demand of interest.

In their appeal, the appellant pleaded for waiver of penalty as they had paid CENVA Tamount denied by the adjudicating authority. The Commissioner(A) was not amused. He not only rejected the appeal for waiver of penalty but also demanded interest under Rule 14 of CCR.

The appellant is before the CESTAT. They did not contest the CENVAT credit denial but are aggrieved by the imposition of penalty and interest.

None appeared on behalf of the appellant nor did they make any request for adjournment.

The AR reiterated the findings of the lower appellate authority and submitted that once the demand stands confirmed, penalty and interest cannot be waived.

The Bench inter alia observed –

Merits:

The appellant have taken credit on the inputs which was used in the manufacture of erection and installation of the furnace within the factory of the appellant. Revenue denied the Cenvat credit only on the ground that no duty was paid on the furnace either by the appellant or contractor i.e. M/s. Bharat Gears Ltd, therefore, credit for input used for manufacture of erection and installation of the furnace is not admissible. I do not agree with this contention of the Revenue for the reason that the furnace is specified capital goods as per the definition provided under Cenvat Credit Rules, 2002. Inputs on which Cenvat credit was availed were indeed used in manufacture of erection and installation of the furnace, in terms of definition of inputs, input includes the goods used in the manufacture of capital goods and if such capital goods used within the factory for manufacture of dutiable goods. In such case, the furnace was exempted under Notification No. 67/95-CE but input used in manufacture of such furnace is clearly covered under the definition of input, therefore, the credit on the input used in the manufacture of furnace is admissible. However, appellant has not disputed the denial of Cenvat Credit and paid the said amount admittedly and not contested.

Penalty:

Since the Cenvat Credit was otherwise admissible, penalty should not have not been imposed, therefore, I set aside the penalty.

Interest:

As regard the interest demanded by the Commissioner (Appeals) in his order, I find that the adjudicating authority in his order explicitly dropped the demand of interest against which Revenue has not filed any appeal before the Commissioner (Appeals), therefore, the said portion related to interest of the order attained finality and since no appeal was filed by the Revenue, Commissioner(Appeals) should not have passed any order in respect of interest. For this reason the interest demanded by the Commissioner(Appeals) in his order is hereby dropped.

The appeal was allowed in above terms.

(See 2015-TIOL-2426-CESTAT-MUM)