2022 (8) TMI 228 - AT - Central Excise

CENVAT Credit availed by the appellant company on capital goods - credit has been availed on the strength of excise invoices issued by the manufacturer (OEM) of equipment - invocation of extended period of limitation - HELD THAT - The Ld. Commissioner in para no. 79 to 81 has arrived at the conclusion that though the entire work for construction of power plant (CPP) is a turnkey contract on EPC basis, the work orders have been segregated to split into supply of goods and works services for their mutual convenience to enable the contractor to claim deduction of value of goods for arriving at value of taxable services for charging service tax. It is found that by making the above observation, the Ld. Commissioner has not conclusively drawn any inference to state whether there is any embargo to avail Cenvat Credit on capital goods, more so ever when there is no dispute with regard to availment of credit on input service in the hands of the appellant. The Ld. Commissioner made a fundamental error while observing that payments have not been made to the original supplier (OEMs) but to the Contractor against the separate set of commercial invoices - In any case, whether or not the payment has been made against the excise invoices issued by the OEM or the commercial invoice issued by the Contractor who has procured the goods on behalf of the Appellant for use in the power plant is completely irrelevant. The Ld. Commissioner has thus made a fundamental error while taking into consideration the above payment related aspect while deciding the eligibility to avail credit on capital goods. Extended period of limitation - HELD THAT - There are no positive evidence to show that there was any fraud or willful suppression inasmuch as the availment of credit has been duly shown in the monthly returns and credit entries have been duly recorded in the Credit Register which form part of the Annexure to SCN. Thus, there are no ingredient to justify invocation of extended period of limitation and therefore, the impugned proceedings are also barred by limitation. The order cannot be sustained and is therefore set aside - Penalty also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Dispute over Central Excise duty demand on capital goods availed by the appellant company.
- Imposition of personal penalty on ex-employee for non-payment of penalty.
- Applicability of CENVAT Credit Rules, 2004 on capital goods availed by the appellant.
- Validity of extended period of limitation invoked in the case.

Analysis:
1. Dispute over Central Excise Duty Demand on Capital Goods:
The appellant, a steel manufacturing company, availed CENVAT credit on capital goods procured for setting up a power plant. The dispute arose when the Department denied the credit, alleging non-compliance with payment procedures and misuse of credit. The Ld. Advocate argued that the goods were received at the factory, fulfilling Credit Rules conditions. The Tribunal found the denial unjustified, as the goods were used for power generation, making the appellant eligible for credit.

2. Imposition of Personal Penalty:
An ex-employee faced a personal penalty for non-payment related to the disputed demand. The Tribunal set aside the penalty, ruling in favor of the appellant. The decision was based on the lack of evidence supporting willful suppression or fraud, as credit entries were duly recorded, and monthly returns reflected accurate information.

3. Applicability of CENVAT Credit Rules, 2004:
The Ld. Commissioner's confusion regarding credit eligibility on capital goods was noted. The Tribunal highlighted errors in the Commissioner's reasoning, emphasizing that the payment method to the original supplier was irrelevant for availing CENVAT credit. The Tribunal found no rule mandating payment to the supplier for credit eligibility, asserting the appellant's compliance with Credit Rules.

4. Validity of Extended Period of Limitation:
The Department invoked an extended period of limitation, alleging suppression of facts. However, the Tribunal found no evidence of fraud or suppression, as the credit details were accurately reported in returns. Consequently, the Tribunal deemed the extended limitation period unjustified, leading to the setting aside of the impugned proceedings and penalty.

In conclusion, the Tribunal allowed both appeals, granting relief to the appellant and setting aside the penalty imposed on the ex-employee. The judgment emphasized compliance with Credit Rules for availing CENVAT credit on capital goods and rejected the invocation of an extended period of limitation due to lack of evidence supporting fraudulent intent.