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2019 (2) TMI 1173 - CESTAT NEW DELHICENVAT Credit - inputs or capital goods - grinding wheels, cutting tools, inserts, etc. - refractory or refractory material - case of Revenue is that the goods are capital goods and not inputs and hence appellant is entitled to only 50% credit in the first year - Held that:- It is observed from the SCN as well as the Order under challenge that there is no denial to the aforesaid fact that three of these items are used by the appellant in the machines manufacturing the final product. As per Cenvat Credit Rules, capital goods, as well as input are defined under Rule 2(a) and 2(k) respectively. Perusal of both these provisions makes it clear that both the terms are relative to the use they are put to. No doubt, grinding wheels are specifically mentioned in the definition of capital goods to be known as capital goods but they can acquire the relative character of being the input. The Hon’ble Apex Court in the case of Collector of Central Excise and others Vs. Solaris Chemical Ltd. [2007 (7) TMI 2 - SUPREME COURT OF INDIA] has held that when the article is captively consumed in the manner that without the use of the said article it was not possible to manufacture the final product. The article will come within the ambit of expression, “use in relation to the manufacture” occurring in Rule 57a of Central Excise Rules, 1944 - The Hon’ble Apex Court has further held that any operation in the course of manufacture if so integrally connected with the operation involved in the emergence of manufactured goods it would come within the term of manufacture and the utilisation of the articles for production of final products will clothe it with the character of being an input which shall be available to cenvat in accordance of Rule 57(a) - thus, three of the goods are held as inputs as such being eligible for the cenvat credit with the 100% utilisation thereof in the same financial year. Hence, the demand with respect to these articles for the interest and the penalty is held not sustainable. Imposition of penalty - Refractory or refractory material - Held that:- The SCN dated 17.09.2010 should not have been issued as being beyond the date of deposit of the proposed liability of the interest. This perusal makes it clear that adjudicating authority has failed to observe the mandate of the statute for no adjudication where the payment has been made even prior the issuance of SCN. Once the payment stands made, the question of any malafide intent to evade the duty has no more relevance. Thus, the Order of imposition of penalty in Appeal No. E/53182/2018 is not sustainable. Appeal allowed - decided in favor of appellant.
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