COMMISSIONER OF CENTRAL EXCISE, BELGAUM Vs. HINDUSTAN ENGINEERS

JUDGEMENT

(1.) THIS appeal filed by the Revenue is directed against an order of the appellate Commissioner setting aside the original authoritys order disallowing CENVAT credit of Rs. 62,964/ - to the assessee for the period June, 2005 to January, 2007, imposing equal amount of penalty on them, etc. The CENVAT credit in question had been availed on MS Flats and MS Angles which were claimed to have been used for manufacturing material handling equipments such as moulding tracks and bucket elevators, which were used for manufacturing dutiable final products in the respondents factory. In the relevant show -cause notice, it was alleged that the above items could not be treated as parts, components or accessories of any capital goods defined under Rule 2(a) of the CENVAT Credit Rules, 2004 (CCR) and therefore any credit of the duty paid on such items was not admissible to the respondent. The show -cause notice relied on certain decisions including the Supreme Courts judgment in Vikram Cements case reported in 2005 (187) E.L.T. 145 (S.C.) wherein the definition of capital goods given under CCR was considered and interpreted. The show -cause notice accordingly proceeded on the basis of alleged irregular availment of CENVAT credit by the respondent, to propose penalty on them apart from seeking to levy interest on duty. In their reply to the show -cause notice, the party pleaded that the MS Flats and MS Angles were cut to required size and used for manufacturing material handling equipments such as moulding tracks and bucket elevators and that these equipments were used for the manufacture of their final products. On this basis, they contended that the flats and angles falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act were appropriately classifiable under Rule 2(a)(A)(iii) as components, spares or accessories of the material handling equipments, which were capital goods falling under Rule 2(a)(A)(i). In this manner, capital goods credit was claimed by the respondent and the proposals in the show cause notice were contested. The adjudicating authority, however, did not accept the plea. It noted inconsistencies in the submissions made by the party and denied CENVAT credit and demanded equivalent amount of duty + education cess. It also demanded interest on duty/cess and imposed penalty equal to the duty/cess on the respondent. Aggrieved by the decision of the original authority, the party preferred an appeal to the Commissioner (Appeals), who set aside the Order -in -Original in view of certain decisions of this Tribunal including Dalmia Cements Ltd. v. CCE [2006 (77) RLT 190 = 2007 (219) E.L.T. 220 (Tri.), wherein MS Plates, MS Angles, MS Channels and Aluminium Sheets used for manufacturing machinery were held to be capital goods.

(2.) IN the present appeal filed by the Department, it is contended that MS Flats and MS Angles are general purpose items classifiable under Chapter 72 and not covered by the definition of capital goods. It is contended that such items are not identifiable as capital goods, nor eligible for CENVAT credit as inputs. The appellant has also claimed support from a line of decisions including the Apex Courts judgment in Vikram Cements case.

(3.) LD . DR has reiterated the grounds of appeal and has urged that the order passed by the original authority be restored.