2017 (1) TMI 27 - AT - Central Excise

Cenvat credit on capital goods - Penalty - Time limitation - Held that - the entire facts regarding availment of modvat credit on the capital goods in question have been correctly disclosed to the department. In my view nothing prevented the department to issue a show cause notice well within the normal period, however show cause notice was issued almost on completion of five years from the date of credit taken. Since there is no suppression of facts on the part of the appellant, the show cause notice is time bar, on this ground itself impugned order is not sustainable

Summary

Issues Involved:
Admissibility of Modvat credit on various capital goods; Limitation period for issuing show cause notice.

Analysis:

Issue 1: Admissibility of Modvat credit on various capital goods

The appellant challenged the disallowance of Cenvat credit on certain capital goods by the Adjudicating authority, leading to an appeal before the Commissioner(Appeals). The appellant argued that there was no suppression of facts as they had diligently declared the capital goods under Rule 57T(1) and maintained proper documentation, including modvat accounts. The appellant contended that the show cause notice issued after a significant delay was time-barred, citing various correspondences and documents submitted to the department over the years. The appellant also presented a detailed submission supported by relevant judgments to establish the admissibility of Cenvat credit on the disputed capital goods. The appellant's counsel highlighted that similar items had been allowed Cenvat credit in previous decisions by the Tribunal, emphasizing the merit of their claim. The appellant's argument rested on the premise of full disclosure and compliance with procedural requirements, asserting their entitlement to the Cenvat credit disallowed by the Commissioner(Appeals).

Issue 2: Limitation period for issuing show cause notice

The Revenue, represented by the Superintendent (A.R.), maintained the findings of the impugned order, emphasizing that the disallowed modvat credit was not admissible as per the definition of capital goods. The Revenue relied on various judgments to support their contention that the lower authorities had correctly disallowed the credit on the disputed capital goods. However, the Tribunal, upon reviewing the records and submissions from both sides, focused on the issue of limitation. The Tribunal noted the chain of correspondence between the appellant and the department, demonstrating the regular filing of declarations and modvat credit accounts. The Tribunal observed that the department was well-informed about the facts concerning the modvat credit on the capital goods in question, as evidenced by the extensive communication over the years. The Tribunal concluded that since there was no suppression of facts by the appellant and the show cause notice was issued after a significant delay, it was time-barred. Consequently, the Tribunal allowed the appeal solely on the ground of limitation, modifying the impugned order accordingly.

In conclusion, the Tribunal's judgment primarily revolved around the admissibility of Modvat credit on capital goods and the limitation period for issuing the show cause notice. The appellant's compliance with procedural requirements and the absence of suppression of facts played a pivotal role in the Tribunal's decision to allow the appeal based on the limitation ground. The detailed analysis of correspondence and submissions formed the basis for the Tribunal's determination, highlighting the significance of timely action and full disclosure in such matters.

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