2016 (9) TMI 89 - AT - Central Excise

Cenvat Credit - Whether the asbestos sheet is covered under the ambit of capital goods or not - Held that - the adjudicating authority in his findings clearly brought out what are capital goods and came to the conclusion that Asbestos sheets are not capital goods and the credit so availed on these items is recoverable. Further he has invoked extended period for suppression of facts with an intent to evade payment of duty and hence penalised them under Rule 15 (2) of CCR, 2004. I totally agree with the order passed by the First Appellate Authority and it is also a fact that there has been a specific exclusion in the definition of capital goods. The ld. Commissioner (A) is therefore right in holding that if the inputs were to include every product which is somehow related to the premises where the manufacturing process goes on, then there may not be a need to provide a definition of the term capital goods and therefore, the acceptance of the contention of the assessee would render the definition of the term capital goods to be redundant as well as the provisions relating to extending the benefit of Cenvat credit to the capital goods. Invokation of extended period of limitation - Held that - the contention of the appellant that the credit was availed in Oct 2011 and the notice demanding recovery of credit was issued on 3.6.2014; that the availment of credit was reflected duly in ER 1 returns and that the cenvat credit were regularly scrutinised by audit officials has nowhere been contested to be wrong by the revenue. It is also to be borne in mind that the appellant mill is managed by the Govt. of Tamilnadu. Therefore, the invocation of extended period is unsustainable. - Decided in favour of appellant

Summary

Issues involved:
1. Availment of Cenvat credit on Iron & Steel structures and Asbestos cement products as capital goods.
2. Applicability of extended period for wrong availment of Cenvat credit.
3. Classification of Asbestos sheet as capital goods.
4. Suppression of facts with intent to evade payment of excise duty.

Analysis:
1. The appellant, a sugar mill, availed Cenvat credit on Iron & Steel structures and Asbestos cement products for modernizing its manufacturing process. The department issued a show cause notice for recovery of wrongly availed credit. The adjudicating authority confirmed a partial recovery and imposed a penalty, which was upheld by the Commissioner (Appeals). The appellant contended that the impugned goods were used as parts/accessories to machinery and for replacing damaged roofing, not as supporting structures. They argued against the invocation of the extended period, citing proper reflection of credit in monthly returns. Case laws were cited in support of the appellant's position.

2. The Revenue argued that the impugned goods were civil construction items excluded from the definition of capital goods under CCR, 2004. They contended that the appellant contravened CCR by wrongly availing Cenvat credit on Asbestos sheets. The Revenue established suppression of facts to evade excise duty, justifying the recovery of ineligible credit with interest and penalty. The Revenue supported the orders of the adjudicating authority and the Commissioner (Appeals), seeking the rejection of the appeal.

3. The Tribunal deliberated on whether Asbestos sheets qualified as capital goods. The adjudicating authority concluded that Asbestos sheets were not capital goods, justifying the recovery of the credit. The Tribunal differentiated the present case from precedent where roofing materials were considered essential for maintaining specific manufacturing conditions. The Tribunal agreed with the Commissioner (Appeals) on the exclusion of Asbestos sheets from capital goods definition. However, the Tribunal found the invocation of the extended period unsustainable based on the timely reflection of credit in returns and the appellant's cooperation, ultimately setting aside the impugned order on grounds of limitation and allowing the appeal partially.

In conclusion, the Tribunal ruled in favor of the appellant on the issue of the extended period but upheld the exclusion of Asbestos sheets from capital goods, leading to the partial allowance of the appeal.