2016 (6) TMI 826 - AT - Central Excise

Cenvat Credit availed MS angles, HR Plates, MS channels etc. as capital goods - MS items were used for manufacture of various parts/components/accessories/spares of capital goods within the factory or for repairs and maintenance of capital goods. - Extended period of limitation - Held that - The appellant has disclosed the availment of credit in the ER-1 returns and also in the Cenvat credit statements. Further, the show cause notice itself relies upon ER-1 returns and the information furnished by appellant. The appellant has also produced photographs and certificate issued by chartered engineer as to the use of MS items in fabrication of capital goods, and these in turn are used for manufacturing finished product. When assessee duly filed ER-1 returns, the jurisdictional Range Officer is required to carryout scrutiny of the returns. If this had been done, the short payment would have come to light. In such circumstances, extended period cannot be invoked as there is no wilful suppression or collusion with intent to evade payment of duty. The show cause notice is time barred. The appellant succeeds on the ground of limitation. - Decided in favor of assessee.

Summary

Issues:
1. Availability of CENVAT credit on MS items used for fabrication of capital goods.
2. Whether the show cause notice is time-barred.

Analysis:

Issue 1: Availability of CENVAT credit on MS items used for fabrication of capital goods:
The appellants were engaged in manufacturing structures and parts of structures, availing CENVAT credit facility. A show cause notice was issued alleging irregular availment of credit on MS angles, HR Plates, and MS channels as capital goods. The appellants contended that the MS items were used for manufacturing parts/components/spares/accessories of capital goods within the factory or for repairs and maintenance, supported by a certificate from a Chartered engineer. They argued that the demand was hit by limitation as there was no suppression of facts, highlighting that they disclosed credit availed in their ER-1 returns. The department claimed suppression based on non-mention of input item details in returns. The issue was whether credit was admissible pre-amendment w.e.f. 07-07-2009, with the appellant citing debatable interpretations and relying on relevant judgments. The AR supported the original authority's decision, emphasizing the lack of supporting documents and alleging suppression by the appellants.

Issue 2: Time-barred show cause notice:
The period under scrutiny was October 2008 to June 2009, with the notice issued on 26-12-2011, beyond the normal period. The department argued that non-disclosure of fabrication/repair of capital goods in ER-1 returns constituted suppression, justifying the extended notice period. However, the appellant's disclosure in returns and production of evidence, including a certificate from a Chartered engineer, were considered. The Tribunal cited precedents emphasizing that suppression requires deliberate withholding of information to evade duty payment, not mere failure to declare. Noteworthy was the reliance on a judgment questioning the retrospective nature of an amendment. Ultimately, the Tribunal held the notice time-barred due to lack of suppression and upheld the appellant's appeal on this ground, without delving into the merits of the case.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal based on the time-barred show cause notice. The detailed analysis highlighted the importance of disclosure, suppression, and the retrospective application of amendments in determining the admissibility of CENVAT credit on MS items used for fabrication of capital goods.