2018 (10) TMI 263 - AT - Central Excise

Time Limitation - CENVAT Credit - steel materials like M.S. Channels, Joists, MS Angles, Beams, HC Coils, HR Sheet Plates, Plates etc. - denial on the ground that the manufacture of machinery out of steel items is not supported by evidence of issue slips showing one to one correlation between particular steel items and a particular machine/ equipment. Held that - The appellant vide letter dated 10.08.2007 intimated the department that they intend to avail the cenvat credit in respect of inputs for manufacturing of capital goods/ inputs (consumed capital goods). It is further noticed that the appellant have been filing Annexure along with ER-1 return showing detailed information of invoice No., date, description of inputs, amount of Cenvat credit etc. to the department. In the ER-1 return also, the attachment of this annexure is mentioned. From the annexure of the Cenvat credit, it is found that the description of the input has been mentioned. With these information provided to the department, nothing more than that is required for the department, if at all they wish to issue SCN, nothing prevented to the department from issuing the SCN within the normal period of one year at least from filing of the return. The period involved in the present case is July and August 2009 whereas the SCN was issued on 17.07.2012 which is much after the normal period of one year. Moreover, this issue was highly debatable. The demand is clearly hit by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Eligibility of Cenvat Credit for steel materials used in machinery fabrication.

Detailed Analysis:

Issue 1: Eligibility of Cenvat Credit
The appellant claimed Cenvat Credit for steel materials used in machinery fabrication for a chemical plant expansion project. The adjudicating authority denied the credit citing lack of evidence showing correlation between steel items and machinery, and concern over equipment attachment to earth. The appellant argued that the claim falls under Rule 2(k) explanation-II, supported by various documents like Chartered Engineer's Certificate and official records. They emphasized the limited credit availed for actual usage in machinery fabrication, not building construction. The appellant contended that the one-to-one correlation requirement was impractical and that the equipment's mobility doesn't affect credit eligibility. They cited multiple judgments supporting their position.

Issue 2: Time Bar
The appellant argued that the demand for Cenvat Credit was time-barred, as the credit was availed in 2009, and the show-cause notice (SCN) was issued in 2012. They maintained that all details were disclosed to the department, and the intention to avail credit was communicated in advance. The appellant highlighted the debatable nature of the legal issue, referencing the Vandana Global case and subsequent conflicting judgments. They asserted that no malafide intent could be alleged against them due to the legal uncertainties. The Tribunal agreed that the demand was time-barred, as the SCN was issued after the normal one-year period, considering the information provided to the department and the debatable nature of the legal issue.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal based on the limitation ground. The decision was made solely on the time bar issue, without delving into the merit of the case. The appellant's proactive disclosure of information and the debatable legal nature of the issue were crucial factors in determining the demand's limitation. The judgment emphasized that no malafide intent could be attributed to the appellant given the legal uncertainties surrounding the matter.