2019 (1) TMI 495 - AT - Central Excise

CENVAT Credit - capital goods - denial on the ground that the appellant has opted for exemption under Notification No. 50/2003-CE dt. 10.06.2003 w.e.f. 3rd May, 2005 - extended period of limitation - Held that - For the period prior to 03.05.2005, the appellant was not availing exemption under Notification No. 50/2003 ibid, but paying duty on their final goods. In these circumstances, for the period prior to 03.05.2005, the appellant has rightly availed the Cenvat credit on capital goods - further, when the capital goods have been procured by the appellant, they were manufacturing only and only exempted final goods. In these circumstances, the appellant is not entitled to avail the Cenvat credit on capital goods; therefore, the Cenvat credit availed from 03.05.2005 on capital goods is denied. Extended period of limitation - Held that - During the period of availment of exemption under Notification No. 50/2003 ibid, the appellant has not intimated to the Department for availment of the Cenvat credit. Unless and until, an investigation was conducted at the end of the appellant, the said availment of the Cenvat credit on capital goods could not be unearth. In these circumstances, we hold that extended period of limitation is rightly invoked. Appeal allowed in part.

Issues:
1. Denial of Cenvat credit on capital goods due to exemption under Notification No. 50/2003-CE.
2. Applicability of Cenvat credit prior to and post 03.05.2005.
3. Bar on limitation for show cause notices issued.
4. Intimation to the Department regarding availment of Cenvat credit.
5. Interpretation of appellant's declaration regarding Cenvat credit on capital goods.
6. Entitlement to Cenvat credit on capital goods procured during manufacturing of exempted final goods.

Analysis:

1. The appellant contested the denial of Cenvat credit on capital goods based on opting for exemption under Notification No. 50/2003-CE. The authorities below rejected the credit due to the exemption. The appellant argued that before 03.05.2005, they were not availing the exemption, thus should be entitled to the credit for that period.

2. The appellant's claim was supported by the argument that they had intimated the Department about availing Cenvat credit on capital goods post 02.05.2005. The contention was that show cause notices issued after this date were time-barred. On the other hand, the respondent argued that opting for the exemption under the said notification precludes the appellant from availing Cenvat credit on capital goods.

3. The Tribunal found that before 03.05.2005, the appellant was not availing the exemption and was paying duty on final goods. Therefore, the appellant rightfully availed the Cenvat credit on capital goods for this period. The Tribunal also noted that the appellant's declaration did not explicitly mention intimation to the Department about availing the credit on capital goods.

4. The Tribunal observed that the appellant, when procuring capital goods, was manufacturing only exempted final goods. Consequently, the appellant was deemed ineligible to claim Cenvat credit on capital goods from 03.05.2005 onwards. The demand for the denied credit was upheld, along with confirming the interest and penalties imposed on the appellant.

5. The Tribunal concluded that the appellant's reliance on their declaration was insufficient to prove intimation to the Department about availing Cenvat credit on capital goods. The lack of explicit communication regarding the credit during the exemption period led to the denial of the credit post 03.05.2005. The appeals were disposed of in favor of denying the Cenvat credit on capital goods from the specified date.

This comprehensive analysis covers the issues raised in the judgment, detailing the arguments presented by both parties and the Tribunal's findings and conclusions on each matter.

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