2012 (11) TMI 1038 - AT - Central Excise

Denial of Cenvat credit on storage system - storage system is used by appellant for storing various inputs/materials which are used by him for manufacturing final products - Whether storage system can be considered capital goods - Held that - definition of input in Rule 2(k) of the Cenvat Credit Rules would specifically indicate that all goods which are used for manufacturing of products, whether directly or indirectly and whether contained in the final product or not, if they are within the factory of production, Cenvat credit of the duty paid is eligible. In my view the lower authorities have accepted that the said storage system is used by appellant in their factory and used for storing raw materials. Appellant has made out a case, inasmuch as Cenvat credit was availed by appellant in the year 2007-08 as per provisions of Cenvat Credit Rules, 2004. In my view the appellant had every reason to entertain a bona fide belief that they are eligible for availment of Cenvat credit, as these storage systems are used within the factory premises. Show-cause notice was issued in the year 2009. In my view the show-cause notice is blatantly time barred as there is no dispute that appellant had filed prescribed returns to the authorities. There cannot be any suppression or wilful misstatement of facts - Decided in favour of assessee.

Summary

Issues involved:
1. Denial of Cenvat credit on storage system as capital goods.
2. Interpretation of Cenvat Credit Rules regarding eligibility for credit.
3. Application of judgments in similar cases.
4. Point on limitation regarding the show-cause notice timeline.

Detailed Analysis:
1. The issue at hand in this case pertains to the denial of Cenvat credit on a storage system installed in the appellant's factory. The appellant used the storage system for storing various inputs/materials essential for manufacturing final products. The central argument revolved around whether the storage system qualified as capital goods as per the Cenvat Credit Rules. The lower authorities denied the credit on the grounds that the storage system did not meet the definition of capital goods. However, upon examination, it was established that the storage system was indeed used for storing inputs within the factory premises, making it eligible for Cenvat credit under the definition of input in Rule 2(k) of the Cenvat Credit Rules.

2. The judgment referenced a case involving Banco Products (I) Ltd., which supported the appellant's position regarding the eligibility of the storage system for Cenvat credit. Additionally, the Co-ordinate Bench decision in the case of Sonai Engineering Pvt. Ltd. also aligned with the interpretation favoring the appellant's claim. The appellant successfully argued that the storage system was crucial for storing raw materials used in production, thus justifying the availment of Cenvat credit. The judgment highlighted that the lower authorities had acknowledged the usage of the storage system within the factory for storing inputs, reinforcing the appellant's entitlement to the credit.

3. Addressing the point on limitation, the judgment emphasized that the appellant had availed Cenvat credit in compliance with the rules during the relevant period. The show-cause notice issued in 2009 was deemed time-barred, considering that the appellant had filed the necessary returns to the authorities and had a legitimate belief in the eligibility for the credit. The judgment concluded that there was no suppression or intentional misrepresentation of facts by the appellant, further strengthening the decision to set aside the impugned order based on both merit and limitation grounds.

In conclusion, the appellate tribunal ruled in favor of the appellant, allowing the appeal and overturning the impugned order due to the eligibility of the storage system for Cenvat credit and the show-cause notice being considered time-barred.