2016 (9) TMI 284 - AT - Central Excise

Cenvat credit - irregular availment of cenvat credit - Mono Block Concrete sleepers(MBC) under the category of capital goods - used for laying railway line which is used for transportation of input materials inside the factory and to carry finished cement outside the factory - connection in or in relation to the process of manufacture of finished goods i.e. cement. Held that - the use as explained by the appellant makes it clear that these are essential and integrally connected to the process of manufacture. Therefore by following the ratio laid in various judgments of Hon ble Apex Court and CESTAT wherein it was held that Cenvat credit on railway track which are used as handling system for raw material is admissible as these are essential and integrally connected to the process of manufacture of final product. Therefore, the appellant has established a case on merits and that credit is admissible on MBC sleepers. Period of limitation - disputed period is 1/2008 to 4/2009 and the show cause notice is dated 15-11-2011 - disclosure of availment in ER-1 returns - Held that - there is no case for revenue that the appellant has not disclosed the credit details in their accounts or in ER-1 returns. They believed that credit is admissible and maintained proper statutory records reflecting the details of credit. On such score, it cannot be alleged that the appellant has willfully suppressed facts with intent to evade payment of duty. Therefore, as the revenue has failed to establish suppression of fact on the part of appellant and no malafide conduct has been proved against appellant, the extended period is not invokable. The show cause notice being time barred is unsustainable. - Decided in favour of appellant with consequential relief

Summary

Issues:
Disallowed CENVAT credit on Mono Block Concrete sleepers (MBC) - Merits and Limitation

Analysis:

Issue 1: Disallowed CENVAT credit on MBC sleepers - Merits
The appellants, engaged in cement manufacturing, faced disallowance of CENVAT credit on MBC sleepers by the original authority. The authority contended that MBC sleepers were not connected to the manufacturing process of cement and thus ineligible for credit. The appellants argued that MBC sleepers were essential for transportation of raw materials and finished products within the factory. The consultant cited relevant judgments, including Jayaswal Neco Ltd Vs CCE and Jindal Steel and Power Ltd Vs CCE, supporting the admissibility of credit on similar items. The tribunal, after considering the submissions, held in favor of the appellant, stating that MBC sleepers were integrally connected to the manufacturing process, making them eligible for credit.

Issue 2: Disallowed CENVAT credit on MBC sleepers - Limitation
Regarding the issue of limitation, the appellants contended that the show cause notice was time-barred as it was issued beyond the normal period without evidence of fraud or suppression. The consultant argued that since the appellant disclosed all credit details in their statutory returns, the extended period was not applicable. The tribunal agreed, emphasizing that there was no willful suppression of facts by the appellant, as required for invoking the extended period. Citing legal precedents, the tribunal concluded that the show cause notice was unsustainable due to being time-barred, and the appellant succeeded on the ground of limitation.

In conclusion, the tribunal found the impugned order unsustainable, setting it aside and allowing the appeal with consequential reliefs. The judgment highlights the importance of establishing the essential connection of items to the manufacturing process for claiming CENVAT credit and emphasizes the significance of timely issuance of show cause notices within the statutory limitations.