2017 (10) TMI 844 - AT - Central Excise

CENVAT credit - Capital goods - various iron and steel items used by them either as supporting structurals or for manufacture of components for the other capital goods, to be used in their chemical plant - time limitation - Held that - the appellant kept their right to claim the credit, in abeyance. It was the accumulated credit, which was not being availed during the relevant period, on account of the legal proceedings having been initiated against them - such an action on the part of the assesse, with the stand taken as per the advice of the jurisdictional officers, would not subsequently attract the limitation prescribed under Rule 4(1) of the Cenvat Credit Rules. The said rules were amended with effect from 01.03.2015. Whether the same would be applicable retrospectively or prospectively is an issue required to be considered - appeal allowed by way of remand.

Summary

Issues:
1. Eligibility of Cenvat credit on iron and steel items used by the appellant.
2. Applicability of the one-year limit for availing credit under Rule 4(1)(a) of the Cenvat Credit Rules, 2004.
3. Compliance with the principle of natural justice in the decision-making process.

Analysis:

Issue 1 - Eligibility of Cenvat Credit:
The appellant, a manufacturer of "Flourine Chemicals," availed Cenvat credit on iron and steel items used for supporting structurals or manufacturing components for capital goods in their chemical plant. Periodical show-cause notices were issued questioning the eligibility of such items as capital goods for Cenvat credit. The Assistant Commissioner raised protective demands due to the pending issue. The Commissioner (Appeals) referred to relevant decisions, allowing credit for repair and maintenance items but disallowing it for structural items. The appellant's claim was rejected based on the one-year limit for availing credit under Rule 4(1)(a).

Issue 2 - One-Year Limit for Availing Credit:
The Commissioner (Appeals) rejected the appellant's claim, citing the one-year limit under Rule 4(1)(a) for availing credit from the date of the duty-paying document's issuance. The appellant's delay in availing credit beyond this period, despite not doing so earlier based on advice, was considered barred by limitation, leading to the appeal's dismissal.

Issue 3 - Compliance with Natural Justice:
The appellant contended that the principle of natural justice was not followed as the original adjudicating authority's decision was ex parte. The Commissioner (Appeals) favored the appellant regarding credit for repair and maintenance items but did not address the claim for items used in the fabrication of capital goods. The matter was remanded to the original authority for a fresh decision, emphasizing adherence to natural justice principles and providing the appellant with a fair opportunity to present their case.

In conclusion, the judgment highlighted the complexities surrounding the eligibility of Cenvat credit, the application of time limits for availing credit, and the importance of procedural fairness in decision-making processes. The remand to the original authority aimed to ensure a comprehensive review of all issues involved, considering legal precedents and principles of natural justice.