2011 (2) TMI 719 - AT - Central Excise

Modvat credit - Input goods - angles, beams, plates, MS channels, sheets and welding rods etc. - Appellant assails the impugned demand on limitation by submitting that the show cause notice for the period 01.04.03 to March 2008 was issued on 05.08.08. He submits that the said disputed issue was decided in their favour by the Tribunal, in their own case reported in N.R. Agarwal Industries Ltd. Vs. CCE Vapi 2007 TMI 1814 CESTAT, AHMEDABAD decisions were in favour of the assessees, the bonafide belief on the part of the appellant that the said items were capital goods for the purposes of modvat credit, has to be upheld - Accordingly the demand beyond the normal period of limitation is required to be quashed - However the demand which is within the period of limitation is required to be quantified and upheld.

Summary

Issues:
1. Denial of modvat credit on certain goods used for construction.
2. Challenge on limitation of demand for the period in question.
3. Imposition of penalty on the appellant.

Analysis:

Issue 1: Denial of Modvat Credit
The judgment confirms the denial of modvat credit amounting to Rs.7,59,438 against the appellant for goods used in construction outside the plant. The denial was based on the argument that such goods were not eligible inputs. The appellant contested this denial, citing previous Tribunal decisions in their favor, but acknowledged a subsequent unfavorable decision by the Larger Bench. The Tribunal ultimately upheld the denial of credit for goods used outside the plant but quashed the demand beyond the normal limitation period. The demand within the limitation period was quantified and upheld.

Issue 2: Challenge on Limitation of Demand
The appellant challenged the demand on the grounds of limitation, arguing that the show cause notice was issued beyond the prescribed period. The advocate highlighted previous Tribunal decisions supporting their position and contended that the appellant had a bonafide belief in the eligibility of the goods for modvat credit. The Tribunal agreed with the advocate, noting that since the period in question predated the unfavorable Larger Bench decision, the appellant's belief was reasonable. Consequently, the demand beyond the limitation period was quashed, while the demand within the limitation period was upheld.

Issue 3: Imposition of Penalty
Regarding the penalty, the Tribunal found that the dispute over the eligibility of the goods for modvat credit was a bonafide one. As a result, no penalty was imposed on the appellant, as there were no grounds to penalize them for the genuine disagreement. The Tribunal set aside the penalty, concluding that the appellant's actions did not warrant such punitive measures. The appeal was disposed of accordingly, with the judgment pronounced in court by the presiding member, Mrs. Archana Wadhwa.