2016 (2) TMI 585 - AT - Central Excise

Eligibility of cenvat credit on the steel item - limitation period prescribed under Section 11A - Held that - In the present case, no iota of evidence has been brought on record by the Department to prove that taking of cenvat credit by the appellant is attributable to suppression, misstatement, collusion etc., with intent to evade payment of duty. Thus in such an eventuality, the SCN was required to be issued within one year from the relevant date. In so far as the SCN dated 16.04.2010 for the period 2008-2009 is concerned, the same is barred by limitation of time, having been issued beyond the period of one year. However, in so far as the credit taken for the period 2009-2010, the SCN has been issued within limitation period prescribed under Section 11A of the Central Excise Act. Thus as per the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. vs CCE Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) the appellant is liable to reverse cenvat credit attributable to such ineligible credit along with interest. Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules 2004, read with section 11AC of the Central Excise Act 1944 is not justified in the facts and circumstances of the present case, especially in view of the fact that there was no element of suppression, misstatement, collusion, fraud etc., on the part of the appellant to defraud payment of Revenue to the Government exchequer. To sum up, SCN initiated for the period April 2008 to February 2009 is barred by limitation of time as per the proviso to section 11A of the Central Excise Act, 1944 and to that extent the appeal succeeds. With regard to the period 2009-2010, am of the view that wrongly availed cenvat credit can be recovered from the appellant along with interest. Thus, appeal for the period 2009-2010 is dismissed.

Summary

Issues:
1. Eligibility of Cenvat credit on disputed goods used as input for capital goods.
2. Limitation period for issuance of Show Cause Notice (SCN) by the Central Excise Department.
3. Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules 2004.

Eligibility of Cenvat Credit on Disputed Goods:
The case involved the appellant availing Cenvat Credit on MS Angles, Channels, and Steel Sheets as input for manufacturing capital goods within the factory. The appellant argued that the disputed goods were used in the thermal system pipeline support and bridging, making them eligible for credit. The appellant cited relevant case laws and judgments to support their claim. The Revenue contended that the inputs were building materials, ineligible for credit under the definition of 'Input Service.' The Tribunal noted conflicting decisions on the eligibility of cenvat credit on steel items and emphasized that the demand raised through SCN should be within one year unless fraudulent activities are proven. As no evidence of fraudulent intent was presented, the SCN issued beyond one year was considered time-barred for the period 2008-2009. However, for the subsequent period, the appellant was directed to reverse the credit attributable to ineligible items along with interest.

Limitation Period for SCN Issuance:
The issue of limitation period for the issuance of the SCN was crucial in this case. The appellant argued that the SCN issued on 16.04.2010 for the period 2008-2009 was time-barred as it exceeded the one-year limitation period without any proof of fraudulent activities. The Tribunal concurred, stating that in the absence of evidence indicating suppression, misstatement, collusion, or fraud by the appellant, the SCN for the earlier period was indeed barred by limitation. However, the SCN for the subsequent period 2009-2010 fell within the prescribed limitation period, leading to the direction for the appellant to reverse the credit for ineligible items along with interest based on the decision of a Larger Bench.

Imposition of Penalty under Rule 15(2) of Cenvat Credit Rules 2004:
The Tribunal addressed the issue of imposing a penalty under Rule 15(2) of the Cenvat Credit Rules 2004 and section 11AC of the Central Excise Act 1944. It was highlighted that no elements of suppression, misstatement, collusion, or fraud were found on the part of the appellant to defraud the Government revenue. Consequently, the imposition of the penalty was deemed unjustified in the circumstances of the case. The Tribunal ruled in favor of the appellant, emphasizing the absence of fraudulent intent in the actions related to the disputed Cenvat credit.

In conclusion, the Tribunal ruled that the SCN issued for the period April 2008 to February 2009 was time-barred due to the absence of evidence of fraudulent activities by the appellant. However, for the subsequent period 2009-2010, the appellant was directed to reverse the wrongly availed Cenvat credit for ineligible items along with interest. The imposition of a penalty under Rule 15(2) of the Cenvat Credit Rules 2004 was deemed unwarranted given the lack of fraudulent intent on the part of the appellant.