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2017 (1) TMI 232 - AT - Central ExciseCenvat credit - MS angles, channels, HR plates, etc - Interest - Penalty - Time limitation - Held that - I do find merit in the contention put forward by appellant counsel, that when the department has accepted the eligibility of credit for the previous period the department ought not to have issued Show Cause Notice for the present period alleging suppression of facts and thus invoking the extended period of limitation - Larger Bench of the Tribunal in the case of Ultratech Cement Ltd., 2016 (1) TMI 520 - CESTAT NEW DELHI . The Tribunal in the said case has analysed that the issue whether MS items used for manufacture/fabrication of capital goods etc., was contentious during the relevant period and therefore extended period is not invokable. Whether MS angles, channels, HR plates, etc., used for fabrication of capital goods is eligible for credit has been I held in favor of the assessee in the case of India Cements Ltd., 2015 (3) TMI 661 - MADRAS HIGH COURT . The period involved as evidenced by the invoices is prior to 07.07.2009 - Appeal allowed - decided in favor of the assessee.
Issues:
1. Allegation of irregular availment of CENVAT credit on inputs and capital goods. 2. Grounds of limitation regarding the Show Cause Notice period. 3. Eligibility of credit on MS items and welding electrodes. 4. Retrospective application of the explanation in the definition of inputs. 5. Interpretation of judgments in similar cases. Analysis: Issue 1: Allegation of irregular availment of CENVAT credit The appellants, engaged in manufacturing Kraft Papers, availed CENVAT credit on MS sheets, MS angles, HR coils, HR plates, and welding electrodes under the category of capital goods. A Show Cause Notice was issued alleging irregular credit availment, leading to confirmation of demand, interest, and penalty by the original authority. Subsequent appeals were filed against this decision. Issue 2: Grounds of limitation regarding the Show Cause Notice period The appellant contended that the Show Cause Notice was time-barred, citing a previous audit report that acknowledged the credit availed on MS items and welding electrodes without issuing any objection. The appellant argued that the subsequent Notice invoking extended limitation was not sustainable, especially when the department had previously accepted the credit availment for the same items. Issue 3: Eligibility of credit on MS items and welding electrodes The appellant argued that the MS items were used for fabrication of capital goods and welding electrodes for machinery repair, justifying the credit availment. The appellant relied on judgments like India Cements Ltd. and Ultra Tech Cement Ltd. to support the eligibility of credit on these items. Issue 4: Retrospective application of the explanation in the definition of inputs The Department contended that the explanation in the definition of inputs imposed restrictions on the use of MS items with retrospective effect, making the credit inadmissible despite the invoices being dated prior to the specified date. Issue 5: Interpretation of judgments in similar cases The judgment analyzed various precedents like Vandana Global Ltd., India Cements Ltd., Mundra Ports & Special Economic Zone Ltd., and others to determine the eligibility of credit on MS items and welding electrodes. The Tribunal's decision highlighted the contentious nature of the issue during the relevant period and the retrospective application of certain legal amendments. In conclusion, the Tribunal ruled in favor of the appellant on both the grounds of limitation and merit, setting aside the impugned order and allowing the appeal with consequential reliefs.
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