2017 (1) TMI 376 - AT - Central Excise

CENVAT credit - MS angles, channels, bars, TMT bar, MS joist, HR sheet, welding electrodes and industrial gas - denial on the ground that these items have not been used for fabrication of any capital goods - Held that - These structural items are used in the manufacture of capital goods such as parts of EOT cranes gantries, galleries, furnace cooling and circulation tank, cable trays etc. The welding electrodes and gases have also been used for such manufacture - similar issue decided in the case of Petropole India Ltd. Vs. CCE, Jaipur-I 2016 (9) TMI 125 - CESTAT NEW DELHI , where the credit was allowed - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of Cenvat credit on duty paid inputs for manufacturing capital goods.
- Disallowance of Cenvat credit by the Department.
- Appeal against the Order-in-Appeal dated 15.11.2011.
- Interpretation of Cenvat Credit Rules, 2004 regarding eligibility of certain items for credit.

Analysis:
1. The appellant, engaged in manufacturing sponge iron chargeable to central excise duty, availed Cenvat credit of &8377; 40,73,691/- on various items like MS angles, channels, bars, TMT bar, welding electrodes, and industrial gas under Rule 2(k) of Cenvat Credit Rules, 2004. The Department alleged these items were not used for fabrication of capital goods and issued a show cause notice dated 19.7.2010 to disallow the credit. The Additional Commissioner confirmed the demand along with interest and penalty, which was upheld by the Commissioner (Appeals) in the Order-in-Appeal dated 15.11.2011, leading to the current appeal.

2. The dispute primarily revolves around the eligibility of Cenvat credit on structural items and welding electrodes/gases used in manufacturing capital goods like parts of EOT cranes. The appellant contended that these items were indeed utilized for fabrication of capital goods, citing precedents in their favor. Notably, the Tribunal's decision in the case of Petropole India Ltd. Vs. CCE, Jaipur-I highlighted the retrospective application of an amendment regarding credit eligibility for iron and steel articles used as supporting structurals.

3. The Tribunal's ruling emphasized that the demand for disallowing the credit was time-barred, as the show cause notice was issued in 2007 for a period before the retrospective amendment of 7.7.2009. The decision underscored that non-disclosure of a fact not mandated by law does not imply malafide intent, especially when previous favorable decisions existed. It clarified that if the law changed subsequent to the period in question, attributing malafide to the assessee for availing credit based on prior legal interpretations was unwarranted.

4. Considering the legal precedents and the retrospective nature of the amendment, the Tribunal concluded that the issue had been settled in favor of the appellant. Consequently, the impugned order disallowing the Cenvat credit was set aside, and the appeal was allowed. The judgment highlighted the importance of legal clarity, retrospective applicability of amendments, and the relevance of past decisions in determining the validity of availed credits under the Cenvat Credit Rules, 2004.