2015 (8) TMI 391 - AT - Central Excise

Denial of CENVAT Credit - Capital goods - Held that - Availment of Cenvat Credit in respect of Steel items, in question, and their use has been declared for ER-1 Return, it was the responsibility of Jurisdictional Assistant Officer to immediate verify their claim and as such it cannot be said that the appellant did not disclose the availment of Cenvat Credit in respect of the inputs in question of their use. Therefore, the appellant have a case in their favour on limitation and have disclosed the usage of the items in question for fabrication of storage tank. - Imougned order is set aside - Decided in favour of assessee.

Issues Involved:
- Eligibility of Cenvat Credit on steel items used for fabrication of tanks
- Time limitation for recovery of Cenvat Credit
- Burden of proof on maintaining proper records for availing Cenvat Credit

Eligibility of Cenvat Credit on steel items used for fabrication of tanks:
The appellant, a manufacturer of various aluminum products, availed Cenvat Credit on steel items used in the manufacture of tanks. The dispute arose when the Assessing Officers questioned the eligibility of availing credit on steel items, claiming they were used in the erection of permanent supporting structures rather than directly in the production process. The Show Cause Notice was issued for recovery of the credit, and subsequent orders confirmed the demand along with penalties. The appellant argued that the steel items were indeed used for fabrication of tanks, which are capital goods, making them eligible for Cenvat Credit as inputs. The Commissioner (Appeals) upheld the denial of credit due to lack of evidence supporting the claim. However, the appellant contended that the mention of availing credit in their ER-1 Returns should be considered as disclosure, and hence, the longer limitation period and penalty should not apply. The Tribunal observed that the appellant had disclosed the usage of steel items in their returns, making it the responsibility of the Jurisdictional Assistant Officer to verify the claim immediately. Consequently, the Tribunal held in favor of the appellant, allowing the appeal and setting aside the demands against them.

Time limitation for recovery of Cenvat Credit:
The appellant argued that the Show Cause Notice seeking recovery of Cenvat Credit availed from October 2007 to April 2009 was time-barred, as they had declared the credit availed on steel items for fabrication of capital goods in their ER-1 Returns. They contended that this declaration should preclude accusations of suppressing relevant facts from the Department, thereby challenging the applicability of the longer limitation period and penalty under Section 11AC. The Tribunal agreed with the appellant, emphasizing that the disclosure in the returns should have prompted immediate verification by the authorities, absolving the appellant from allegations of non-disclosure and supporting their case on limitation.

Burden of proof on maintaining proper records for availing Cenvat Credit:
The LD. DR opposed the appellant's contentions by highlighting the requirement under Rule 9(5) of the Cenvat Credit Rules, 2004, for manufacturers to maintain proper records regarding the receipt and disposal of inputs for availing Cenvat Credit. The absence of such records from the appellant led to the denial of credit by the Commissioner (Appeals). The Tribunal acknowledged the burden of proving correct availing of Cenvat Credit lies with the manufacturer, but in this case, the disclosure in the ER-1 Returns was deemed sufficient disclosure. Therefore, the Tribunal ruled in favor of the appellant, emphasizing the responsibility of the authorities to verify claims promptly based on the information provided in the returns.

In conclusion, the Tribunal allowed the appeal, setting aside the demands against the appellant concerning the eligibility of Cenvat Credit on steel items used for fabrication of tanks, the time limitation for recovery of Cenvat Credit, and the burden of proof on maintaining proper records for availing Cenvat Credit.

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