Per M. Veeraiyan:
This is an appeal against the order of the Commissioner (Appeals) No. 106/CE/GZB/2007 dated 30.4.2008.
2. Heard both sides.
3. The relevant facts, in brief, are that the appellants received shapes and sections falling under chapter sub heading 7216.10 and took credit as capital goods; they used such shapes and sections to fabricate moulds; moulds were exempted under notification No. 67/95 dated 16.3.95 as they were used within the factory of production. The original authority held that the goods cannot be treated as capital goods and denied the credit amounting to Rs.38,052/- and ordered recovery of the same along with interest and imposed Rs.38,052/- as penalty. Commissioner (Appeals) upheld the order of the original authority.
4. Learned advocate submits that the moulds are included in the definition of the capital goods. The definition of the capital goods also included parts, components and accessories used for capital goods. There is no dispute that the shapes and sections have been used for fabricating moulds which are treated as capital goods and therefore by the inclusive part of the definition said shapes and sections are also to be treated as capital goods. The shapes and sections were used for fabricating moulds which were used for manufacture of final products within the factory, and therefore, no specific intimation was given as they were under the bonafide belief that moulds being exempted by 67/95, there is no need for such intimation. There can be no dispute that they are eligible for credit, under the circumstances there is no intention to evade any duty.
5. Learned DR reiterates the finding and reasoning of the Commissioner (Appeals). He submits that the part of the definition of capital goods, treating the components, spares and accessories of the goods meant for capital goods, also as capital goods does not apply to moulds, dies, jigs and fixtures.
6.1 I have carefully considered the submissions from both sides. The definition of the capital goods as per Cenvat Credit Rules 2004 reads as under :
“RULE 2 (a) -capital goods- means:-
(A) the following goods, namely :-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, used -
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliances used in an office; or
(2) for providing output service;
6.2 From the above, it is clear that the components, spares and accessories of the goods which are meant for Serial No. (i) and (ii) above are only covered as capital goods as per the definition. Therefore, while it is true that moulds are to be considered as capital goods, because of nature of definition, the shapes and sections which have been used for fabrication of moulds cannot be treated as capital goods. In view of the above, denial of credit and order for recovery of Rs.38,052/- deserves to be upheld. Accordingly, the demand of duty along with interest is upheld.
6.3 The submission that the demand is time barred also cannot be accepted as department was not privy to appellants using the inputs for manufacture of moulds as they have not claimed any exemption in respect of the moulds specifically in their ER I returns. While the credit requires to be denied on the above ground, it cannot be considered as a fit case for imposition of equal amount of penalty. Therefore, the penalty imposed under Rule 15 of the Cenvat Credit Rules is reduced from Rs.38,052/- to Rs.2,000/- (Rupees two thousand only).
7. The appeal is disposed of.