2016 (11) TMI 1493 - AT - Central Excise

Penalty - irregularly availed CENVAT credit later reversed - extended period of limitation - Held that - The period is prior to 7-7-2009 and the appellants cannot be saddled with the intention to evade payment of duty for this period for the credit availed on MS items used in construction of sheds, etc. - invocation of extended period is unsustainable and the demand is time barred - No penalty can be imposed - appeal dismissed - decided against appellant.

Summary

Issues:
1. Challenge to Order-in-Appeal allowing credit on MS items under capital goods category.
2. Failure to discuss penalty imposition on irregular credit availed.
3. Appeal against setting aside penalty by Commissioner (Appeals).

Analysis:
1. The department appealed against the Order-in-Appeal allowing credit on MS items like angles, joists, and channels under the capital goods category. The Commissioner (Appeals) set aside the demand, ruling that the credit availed for fabricating EOT Crane, Conveyors, and other capital goods was justified. The Commissioner based this decision on the use of MS items confirmed by a Chartered Engineer's certificate. The demand of ?10,03,080 was set aside along with interest, and no penalty was imposed as per the impugned order.

2. The department contested the decision, arguing that the penalty should have been imposed on the irregularly availed credit of ?7,02,192 that was later reversed by the respondent. The department believed that the penalty was warranted for the irregular credit availed, contrary to the Commissioner's ruling. However, the Commissioner (J) dismissed the appeal, upholding the decision to not impose a penalty.

3. The period under consideration was from April 2006 to June 2009, before the amendment excluding MS items from input definition came into effect on 7-7-2009. The show cause notice was issued on 7-2-2011, invoking the extended period. The appellant had disclosed the credit availed in returns and statements filed before the department. The Commissioner (J) deemed the invocation of the extended period as unsustainable, as the issue of credit admissibility on MS items for construction was resolved post the relevant period. Consequently, the demand was considered time-barred, and no penalty was deemed applicable, leading to the dismissal of the appeal.

In conclusion, the judgment addressed the challenge to the Order-in-Appeal regarding credit on MS items, the issue of penalty imposition on irregular credit availed, and the sustainability of the extended period for demand. The decision favored the appellant by setting aside the demand and not imposing a penalty, considering the timeline and circumstances surrounding the credit availed on MS items.