2016 (3) TMI 618 - AT - Central Excise

Cenvat credit disallowed - credit ordered to be recovered along with interest; mandatory equal penalty was also imposed - Held that - It is not in dispute that the respondent had been submitting its monthly returns clearly showing availment of the impugned credit. Thus it is incorrect to say that it did not disclose the fact of availment of Cenvat credit on the impugned goods. These returns do not require listing of the goods on which the credit has been taken and therefore the respondent cannot be held guilty of suppression on the ground that it had not listed the goods on which credit was taken in the monthly return. No provision of law has been brought to our notice by ld. DR which requires the respondent to give list of goods on which credit is taken. The allegation relating to wilful mis-statement / suppression of acts is not sustainable and consequently extended period and mandatory penalty are not invocable. Allow the appeal by way of remand to the primary adjudicating authority for de novo adjudication with the following direction/observations -(i) Cenvat credit is not admissible in respect of the impugned goods, (ii) Extended period of 5 years and mandatory equal penalty are not attracted. and (iii) The de novo adjudication should therefore be confined to only normal period of one year.

Summary

Issues:
Appeal against disallowance of Cenvat credit on wall panels and doors; Classification of impugned goods as inputs or capital goods; Allegations of wilful misstatement or suppression of facts; Interpretation of the definition of inputs under Cenvat Credit Rules.

Detailed Analysis:

Issue 1: Disallowance of Cenvat Credit
The appeal was filed by the Revenue against the order disallowing Cenvat credit of Rs. 36,90,921 on wall panels and doors, along with interest and a mandatory penalty. The primary adjudicating authority held that the impugned goods were neither inputs nor capital goods, while the Commissioner (Appeals) allowed the credit, deeming the goods eligible as inputs for the manufacture of pharmaceuticals.

Issue 2: Classification of Impugned Goods
The Revenue contended that the goods did not qualify as inputs or capital goods as per the defined criteria and accused the respondent of wilful misstatement or suppression of facts. They argued that the CBEC clarification cited by the Commissioner (Appeals) was irrelevant and referred to relevant court judgments to support their position.

Issue 3: Interpretation of Inputs Definition
The respondent argued that the panels and doors were essential for maintaining a clean environment necessary for pharmaceutical manufacturing, thus qualifying as inputs as per the definition provided in Rule 2(k) of the Cenvat Credit Rules. They emphasized the importance of the goods in relation to the manufacturing process and highlighted the submission of periodical returns showing the impugned credit.

Issue 4: Allegations of Wilful Misstatement
The show cause notice accused the respondent of wilful suppression of facts regarding the Cenvat credit on the impugned goods. However, the respondent's submission of monthly returns indicating the credit availed contradicted the allegation of non-disclosure. The judgment cited relevant legal precedents to establish the requirement for positive action or conscious withholding of information for invoking the extended period.

Conclusion:
The Tribunal found that the impugned goods did not meet the criteria to be classified as inputs, leading to the disallowance of Cenvat credit. The allegations of wilful misstatement were deemed unsustainable, and the extended period and mandatory penalty were not applicable. The appeal was allowed for a remand to the primary adjudicating authority for further adjudication within the normal one-year period.