2024 (5) TMI 195 - AT - Central Excise

CENVAT Credit - services utilized for setting up plant for manufacturing of finished products which started with effect from September 2015 - amendment in Rule 2 (l) of CCR, 2004 with effect from 01/04/2011 and the word setting up was removed because of which Cenvat Credit cannot be taken for the services used towards setting up of the factories - suppression of facts or not - extended period of limitation - HELD THAT - There is no dispute that the Appellant is manufacturing goods which were exigible to Excise Duty payment when they are cleared from their factory. They have taken the Cenvat Credit on various input services which have been used before they commenced the manufacturing activities. The issue is no more res-integra. This Bench in the case of Texmaco UGL Rail (P) Ltd, 2019 (7) TMI 1651 - CESTAT KOLKATA has held ' the amendments have been made in the definition of input services effective from 1 stApril, 2011 to specifically exclude input services in forms of works contract or construction services used in relation to building or civil structure or part thereof. It also excludes similar services used for laying of foundation or making of structure for support of capital goods. Thus, the intention of legislature was to restrict input tax credits on above services, which are used during factory set up and hence the term setting up was removed from the earlier definition having specific exclusion clause in the new definition.' There are substantial force in the Appellant s submission that when they were taking the Cenvat Credit and reflecting the same in the ER-1 Returns during the period 2012 to 2015, the Department was very much aware that they were taking the Cenvat Credit for various input services. The Department was aware that till September 2015, they were not manufacturing the goods, nor clearing the same. Therefore, the Appellant cannot be fastened with the liability of suppression. The confirmed demand for the extended period is also hit by time bar. Therefore, the Appeal stands allowed even on account of limitation.

Summary

Issues involved:
1. Eligibility of Cenvat Credit for input services used during setting up of factory.
2. Time bar for Show Cause Notice issued for Cenvat Credit taken during a specific period.

Eligibility of Cenvat Credit:
The Appellant, engaged in manufacturing "Non Malleable Cast Iron Articles," claimed Cenvat Credit for input services utilized during the period from 01/03/2012 to 31/03/2016, when setting up their plant for manufacturing finished products. The Department contended that post 01/04/2011, Rule 2(l) of CCR, 2004 excluded Cenvat Credit for services used in setting up factories. The Appellant argued that these services were essential for commencing manufacturing activities, citing relevant case laws supporting their eligibility for Cenvat Credit. The Tribunal, considering the case laws and factual details, allowed the Appeal on merits, emphasizing that the Appellant was entitled to the credit as the services were used before manufacturing commenced.

Time bar for Show Cause Notice:
The Show Cause Notice issued on 17/05/2017 for Cenvat Credit taken from 01/03/2012 to 31/03/2015 was challenged by the Appellant as time-barred. The Appellant contended that as they regularly filed ER-1 Returns showing the credit taken, the Department was aware of the situation and there was no suppression. The Tribunal agreed that the Department was informed of the credit taken during the mentioned period, and as there was no suppression on the Appellant's part, the demand for the extended period was also held to be hit by the time bar. Consequently, the Appeal was allowed even on the basis of limitation.

Conclusion:
The Tribunal allowed the Appeal on merits, affirming the Appellant's eligibility for Cenvat Credit on input services used before commencing manufacturing activities. Additionally, the Tribunal held that the Show Cause Notice for the mentioned period was time-barred due to the Department's awareness of the credit taken by the Appellant. The Appeal was allowed with consequential relief as per law.