2016 (12) TMI 717 - AT - Central Excise

Denial of CENVAT credit - denial on the ground that appellants have availed irregular credit on MS Channels, MS Angles, MS Rolls, MS Bright Bars and Beams under the category of capital goods for the period August 2010 to January 2012 - Held that - On perusal of records it is seen that MS Angles, Beams, Channels etc., were used by appellants for fabrication of tubes connecting the various machineries. There is no case for the department that the subject items were used for laying foundation or for building/shed. There is no allegation that the subject items were diverted in any other manner. Pipes fall within the definition of capital goods and therefore the subject items used for fabrication of steel tubes/pipes to connect the machines would fall under the category of parts/components of capital goods. Further it is seen that the department had full knowledge of the credit availed by appellants in the earlier audit conducted in 2010. Further the ER-I returns filed by appellant disclosed the credit availed. - Therefore on merit I find that the appellant has succeeded and the credit is eligible. Extended period of limitation - Held that - The Show Cause Notice is issued invoking the extended period even though, the department had full of knowledge with regard to credit availed by the appellant in 2010. No objection was raised by the department after the earlier audit. There is no evidence to establish suppression of facts with intent to evade payment of duty. On such score, the appeal is allowed on merit as well as on the ground of limitation. CENVAT credit allowed - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues Involved:
Alleged irregular credit on specific items as capital goods, admissibility of CENVAT credit, time bar on Show Cause Notice issuance.

Analysis:
The case involved the appellants, engaged in manufacturing steel tubes and pipes, availing CENVAT credit on inputs and capital goods. A Show Cause Notice was issued, alleging irregular credit availed on specific items categorized as capital goods. The original authority confirmed the duty demand, along with interest and penalty, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant's counsel argued that the subject items were used for fabrication of steel tubes/pipes within the factory, making the credit admissible as components/spares of capital goods. It was contended that the Show Cause Notice was time-barred, as the department had prior knowledge of the disputed credit during an earlier audit, where no objection was raised. The department, represented by the Ld. AR, maintained that the subject items did not qualify as capital goods, justifying the denial of credit.

Upon review, it was found that the subject items were indeed used for fabrication of tubes connecting various machineries, falling under the category of parts/components of capital goods. The department had prior knowledge of the credit availed during an earlier audit, and the eligibility of credit on such items was established through precedents. Consequently, the appellant succeeded on merit, and the credit was deemed eligible. The argument of limitation was also upheld, as there was no evidence of suppression of facts to evade duty payment. As a result, the appeal was allowed on both merit and the ground of limitation, setting aside the impugned order.

In conclusion, the appeal was allowed with consequential reliefs, highlighting the admissibility of credit on the disputed items used in the fabrication process and the time-barred nature of the Show Cause Notice based on the department's prior knowledge and lack of evidence of intent to evade duty payment.