2022 (1) TMI 1174 - AT - Central Excise

CENVAT Credit - inputs - M.S. Grating - M.S. Stair Case - LED Street Light, etc. - inputs used for generating power, as part of power is supplied to the residential colonies/staff quarters of the appellant - extended period of limitation - HELD THAT - The Court Below has totally mis-conceived the issue, and there is failure to exercise the jurisdiction vested in them. A point of law or an alternative plea can be taken, at any stage, and the Adjudicating Authority or Appellate Authority is bound to decide the same - considering the admitted facts on this issue that the items in dispute have been used in the factory of production, it is held that the cenvat credit is allowable on these items under dispute as inputs, as defined in Rule 2 (k) of CCR, 2004. Disallowance of proportionate credit on inputs and input services used in the captive power plant - HELD THAT - In all the Audit reports, the issue of proportionate disallowance for power supply from captive generation to the staff quarters was not raised. In spite of the fact that in the Audit report dated 4.5.2016 by way of objection no.5, expenses on the security services relating to the residential colony was taken, and the cenvat credit was proposed to be denied. Extended period of limitation - HELD THAT - This issue has been raised by way of change of opinion and as such, there being no suppression or malafide on the part of the appellant/assessee, accordingly, the extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of cenvat credit on items like M.S. Grating, Stair Case, and LED Street Light.
2. Disallowance of proportionate cenvat credit on inputs used for generating power.
3. Show cause notice being barred by limitation.

Analysis:

Issue 1: Rejection of cenvat credit on specific items
The appellant, a cement manufacturer, faced rejection of cenvat credit on items like M.S. Grating, Stair Case, and LED Street Light by the Anti Evasion officers. The appellant argued that these items were used in the factory and should be allowed as inputs under Rule 2(k) of CCR, 2004, citing a Board's Circular. The Adjudicating Authority upheld the disallowance, stating the plea of allowability was not sustainable. However, the Appellate Tribunal found the disallowance unjustified, holding that the items were used in the factory and thus eligible for cenvat credit as inputs.

Issue 2: Disallowance of proportionate cenvat credit on power generation inputs
Regarding the disallowance of cenvat credit on inputs used for power generation supplied to the residential colony, the appellant argued that the issue was raised as a change of opinion without suppression or malafide, making the extended limitation period inapplicable. The Tribunal agreed, setting aside the disallowance of cenvat credit amounting to ?21,80,258 and ?4,31,419, holding it to be time-barred and also setting aside the penalty.

Issue 3: Show cause notice limitation
The Tribunal found that the Court Below had mis-conceived the issue and failed to exercise its jurisdiction by not considering alternative pleas raised by the appellant. It emphasized that a point of law or an alternative plea can be taken at any stage, and the authority must decide on it. The Tribunal allowed the appeal, granting the appellant consequential benefits in accordance with the law.

In conclusion, the Appellate Tribunal ruled in favor of the appellant, allowing cenvat credit on disputed items and inputs used for power generation, while also holding the show cause notice as time-barred and setting aside the penalty.