2010 (7) TMI 339 - AT - Central Excise

Cenvat credit capital goods/input construction of bio-gas plant adjacent to the factory premises - DR submits that the bio-gas plant was not part of the approved plan of the factory - Considering the nature of use the goods cannot be held as capital goods eligible for Cenvat credit - However demand is not sustainable on the issue of period of limitation.

Summary

Issues:
1. Disallowance of Cenvat credit for setting up a bio-gas plant
2. Eligibility of Cenvat credit on impugned goods
3. Time-barred demand for Cenvat credit

Analysis:

Issue 1: Disallowance of Cenvat credit for setting up a bio-gas plant
The respondent constructed a bio-gas plant using various materials and availed Cenvat credit for the fabrication. A show cause notice was issued proposing disallowance of credit amounting to Rs. 95,411. The original authority disallowed the credit and imposed a penalty. The Commissioner (Appeals) allowed the appeal on both merits and limitation. The Department argued that the bio-gas plant was not part of the approved plan and the use of materials was not known to them. However, the Tribunal held that the nature of use of the materials in setting up the bio-gas plant did not qualify them as capital goods eligible for Cenvat credit. The Commissioner's findings on the time-bar aspect were upheld as there was no suppression of facts.

Issue 2: Eligibility of Cenvat credit on impugned goods
The Department contended that the respondents were not eligible for credit based on a decision of the Larger Bench of the Tribunal. The respondent argued that there were different interpretations on the eligibility of credit for the impugned goods. The Tribunal found that during the relevant period, there were conflicting interpretations on the admissibility of Cenvat credit for the materials used. The belief of the respondents that they were eligible for the credit was considered bona fide, with no suppression of facts. Hence, there was no justification for invoking the extended period of limitation.

Issue 3: Time-barred demand for Cenvat credit
The Commissioner (Appeals) held that the demand under the impugned order was confirmed under the extended period without proper justification. It was noted that the respondents had declared the setting up of pollution control equipment to the Department earlier, indicating no suppression of facts. As all details were available from public documents like the balance sheet, the demand was considered time-barred. The grounds of appeal did not provide any material to challenge the Commissioner's findings on the time-bar aspect. Therefore, the appeal of the department was rejected, and the cross-objection along with the application for Condonation of Delay were dismissed as withdrawn.