2018 (5) TMI 1288 - AT - Central Excise

Scope of SCN - CENVAT credit - inputs/capital goods - MS Angles, MS Bars, Channels, etc. which were used to build structural items for equipments like bunkers, conveyors, Kiln etc. treating them as capital goods - Held that - the impugned order has traveled beyond the SCN because in the SCN, the only allegation is that the MS Angles, MS Bars, Channels which have been used in the fabrication of various equipments are embedded to earth so as to form immovable property and hence cannot be considered as capital goods , whereas in the impugned order, the Commissioner has accepted that credit cannot be denied on the ground of immovability but still he has denied the credit by invoking the user test which was not an allegation in the SCN - appeal allowed - decided in favor of assessee.

Summary

Issues:
Appeal against rejection of cenvat credit on MS Angles, MS Bars, Channels used in fabrication of equipment as capital goods.

Analysis:
The appellant, engaged in manufacturing sponge iron, appealed against the rejection of cenvat credit on MS Angles, MS Bars, Channels, etc., used in building structural items for equipment. The lower authority, citing a High Court decision, held the credit irregular, leading to a show-cause notice proposing denial of credit, interest demand, and penalty imposition. The Commissioner upheld the decision, prompting the present appeal.

The appellant argued that the impugned order deviated from binding judicial precedent, as the denial was based on the user test, not raised in the notice. Citing various decisions, the appellant contended that the capital goods' immovability is irrelevant for credit eligibility. Additionally, settled decisions favored the appellant on availing credit for iron and steel items used in equipment fabrication.

The appellant further claimed the demand prior to 2009 was time-barred due to interpretation issues and subsequent decisions favoring the assessee. The AR supported the impugned order's findings, but the Tribunal found the order exceeded the show-cause notice's scope. Despite acknowledging immovability, the Commissioner denied credit based on the user test, not alleged initially. Relying on precedent and the irrelevance of immovability, the Tribunal allowed the appeal, setting aside the impugned order.

In conclusion, the Tribunal's decision favored the appellant, emphasizing adherence to the show-cause notice's scope and established legal principles regarding cenvat credit eligibility for items used in equipment fabrication. The judgment highlighted the importance of consistency with legal precedents and proper application of statutory provisions in tax matters.