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2018 (11) TMI 826 - AT - Central ExciseCENVAT Credit - capital goods - appellant availed 100% credit in first year - revenue neutrality - Held that - When the situation is revenue-neutral, then no malafide intention could be discerned. In addition, undoubtedly, it is a case where extended period has been invoked by the Revenue and therefore, the burden of proving malafide/suppression is on the Revenue, since, it is the cardinal principle of law that the burden of proof lies on the shoulder of the person alleging it. Moreover, a mechanical reproduction of the language used in the statute would not per se justify the malafide intentions nor the invocation of extended period of limitation - Revenue has grossly erred in invoking extended period of limitation even after being satisfied that it was the case of revenue neutrality and for which reason alone, the impugned order is set aside. Even on merits, admittedly, the goods are covered under CTH 82, 84, 85 and 90 and just for this reason alone the Revenue has sought it to be classified as capital goods . The arguments of the Ld. Consultant that the above goods were never capitalized in the appellant s books; that they were consumed during the process of the manufacturing activity of the appellant which only proves that they were not having any enduring benefits, etc., has nowhere been attempted to be dislodged - credit remains allowed. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Availment of Cenvat Credit on goods classified under Central Excise Tariff Chapter 82, 84, 85, and 90. 2. Classification of goods as 'capital goods' or 'inputs'. 3. Invocation of the extended period of limitation. 4. Imposition of penalty under Section 11AC of the Central Excise Act. Detailed Analysis: 1. Availment of Cenvat Credit: The assessee availed 100% Cenvat credit on goods classified under Central Excise Tariff Chapter 82, 84, 85, and 90, which the adjudicating authority deemed as parts/components or accessories of machines used in manufacturing processes. The show-cause notice issued on 01.06.2016 alleged that the appellant availed excess and irregular credit as per Rules 2, 3, and 4(2)(a) of the Cenvat Credit Rules, 2004. However, the adjudicating authority noted that since the noticee was eligible to avail the remaining 50% of the credit during subsequent years, the amount need not be recovered. 2. Classification of Goods: The appellant contended that the goods in question were consumables used during the manufacturing process and not 'capital goods'. The definition of 'input' excludes capital goods unless used as components or parts in the manufacture of final products. The appellant argued that merely falling under Chapter 82, 84, 85, or 90 does not classify them as 'capital goods'. The adjudicating authority's observation that these goods were consumables supported the appellant's claim. The Tribunal referenced the decision in M/s. Pattabi Enterprises Vs. CCEx, which held that goods not providing enduring benefits cannot be classified as 'capital goods'. 3. Invocation of Extended Period of Limitation: The appellant argued that the show-cause notice dated 01.06.2016 invoked the extended period of limitation without attributing mala fides. The appellant cited several decisions, including M/s. Uniworth Textiles Ltd. Vs. CCE and Sourav Ganguly Vs. Union of India, to argue that the absence of fraud or suppression allegations makes the invocation of the extended period invalid. The Tribunal agreed, noting that the burden of proving mala fides or suppression lies with the Revenue. The show-cause notice and subsequent orders lacked specific allegations of mala fides, making the invocation of the extended period unjustified. 4. Imposition of Penalty: The appellant contended that penalties under Section 11AC could only be levied when duty is determined under Section 11(A)(10). Since the adjudicating authority did not demand the alleged excess credit nor proposed to appropriate any amount, no penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC(c) could be levied. The Tribunal found merit in the appellant's argument, as the Revenue's actions did not demonstrate any malafide intentions or suppression of facts. Conclusion: The Tribunal concluded that the Revenue erred in invoking the extended period of limitation and classifying the goods as 'capital goods'. The appellant's goods, being consumables without enduring benefits, were entitled to Cenvat credit. The Tribunal set aside the impugned order, allowing the assessee's appeal on both grounds, and entitled the assessee to consequential benefits. Order Pronounced in Open Court on 15/10/2018.
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