2010 (12) TMI 727 - AT - Central Excise

Reversal of such Cenvat Credit - Revenue officers came to the conclusion that the appellants having not informed the Department regarding the receipt of these goods in the factory premises could not have availed the Cenvat Credit and cleared the same - It is also his submission that there is no time limit prescribed for availment of the credit in the current Cenvat Credit Rules and reversal of Cenvat Credit before utilization amounts to non-taking of credit - It is undisputed that the capital goods which were procured and purchased by the appellants were for captive co-generation power plant - If that be so the credit availed by the appellants on the said co-generation power plant and subsequent removal of the same as such cannot be faulted with Credit on the parts of the power plant for assembling of power plant for generation of electricity - Tribunal in the case of Grasim Industries Ltd. has clearly laid down that Cenvat Credit cannot be denied on the items which were used for assembling captive power generation plant and the power plant satisfied the criteria for the definition of capital goods - When the law is settled on the issue there is no justification to deny the credit on the ground that it is availed after a long time - Appeal is allowed

Summary

Issues:
Denial of Cenvat Credit on capital goods procured during specific financial years due to alleged non-disclosure to the Department and subsequent clearance of goods 'as such'; Contestation of show-cause notice on various grounds including the point of limitation.

Analysis:

The appeal in question was directed against Order-in-original No. 13/2008-C.Ex. (Commr.) dated 12-12-2008. The appellants, engaged in manufacturing sugar and molasses, were availing Cenvat facilities under the Cenvat Credit Rules, 2004. It was observed during scrutiny that they had taken Cenvat Credit on capital goods procured in specific financial years but cleared them 'as such' by reversing the credit amount. The Revenue officers alleged that as the appellants did not inform the Department about receiving these goods in the factory premises, they were not eligible to avail the Cenvat Credit and clear the goods in that manner. A show-cause notice was issued for reversal of the ineligible credit availed and subsequent clearance. The Adjudicating Authority, after considering submissions and principles of natural justice, held against the appellants, imposing a substantial amount as liability along with penalties.

The primary issue revolved around the denial of Cenvat Credit on duty paid capital goods procured during specific financial years but not installed due to business exigencies. The appellants contended that the duty paid at the time of clearance should suffice as a reversal of any alleged ineligible credit, emphasizing that the goods were intended for a power project but could not be utilized. They argued that the Department should not dispute their eligibility for Cenvat Credit as the goods were received in their factory premises. Citing relevant legal precedents and Circulars, they maintained that the denial was based on the goods' intended use for a non-dutiable product. The appellants also raised the absence of a time limit for availing credit under the current Cenvat Credit Rules, asserting that their case fell within the limitation period based on timely filings and disclosures.

Upon thorough consideration of submissions and records, the Tribunal found that the denial of Cenvat Credit on duty paid capital goods for a co-generation power plant was unjustified. It was established that the goods were procured for a specific purpose, duty paid, and available in the factory premises. The Tribunal referenced legal precedents to support the appellants' position regarding the eligibility for Cenvat Credit on items used for assembling a power plant. Notably, the Tribunal rejected the Adjudicating Authority's basis for denial related to the timing of credit availing, citing precedents where delayed credit availing was deemed justified. Furthermore, the Tribunal agreed with the appellants on the limitation aspect, noting their consistent disclosures in monthly returns and communication with authorities, thereby deeming the extended period of limitation inapplicable. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal's detailed analysis and findings favored the appellants, emphasizing the lawful procurement and intended use of the capital goods for a specific project, ultimately leading to the reversal of the adverse order and the allowance of the appeal.