2016 (3) TMI 615 - AT - Central Excise

Cenvat credit of tax paid on inputs utilized for fabrication of machineries or capital - Held that - When supporting structures are essential part of the machinery, in order to manufacture taxable output, the Cenvat credit is available. Further, in view of the finding already Commissioner (Appeals) that there is no element of concealment or contumacious conduct on the part of the appellant and the issue is wholly interpretational In nature, and also in view of the fact that the revenue also had information of taking of Cenvat credit in view of the earlier show cause notice for the preceding period, hold without entering into the merits, that the demand for extended period, cannot be sustained. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of Cenvat credit on inputs utilized for fabrication of machineries or capital goods.
2. Interpretation of whether certain goods were used in the manufacture of exempted goods.
3. Applicability of extended period for invoking demand.
4. Ruling on Cenvat credit for supporting structures.

Analysis:

1. The appellant, a manufacturer of sugar molasses and spirits, appealed against an order disallowing Cenvat credit on inputs used for machinery fabrication. The show cause notice alleged wrongful credit on iron and steel items. The appellant argued the goods were used for manufacturing taxable outputs. The order-in-original confirmed demands and imposed penalties. The Commissioner (Appeals) upheld disallowance except for digester tank credit, citing no fraud. The appellant appealed to the Tribunal.

2. The Commissioner (Appeals) found biogas from the tank used for fuel, not exempted goods. The tank was considered capital goods, allowing credit. The issue was deemed interpretational, leading to penalty deletion. The appellant challenged the extended period demand citing lack of fraud. The appellant relied on a Supreme Court ruling regarding knowledge of authorities.

3. The revenue supported the impugned order. Referring to a Tribunal ruling on SSI exemption, they argued for no limitation bar due to the appellant's failure to inform on crossing SSI limit. Another case was cited to assert Cenvat credit inapplicability for supporting structures.

4. The Tribunal noted the distinction of the Vandana Global ruling by High Courts, allowing credit for essential supporting structures. Considering no concealment and interpretational nature, the extended period demand was rejected. The appeal was allowed, granting consequential benefits.