2016 (9) TMI 1052 - AT - Central Excise

Invokation of extended period of limitation - Imposition of penalty - Cenvat credit disallowed on goods, namely angles, plates, channels and joists - no documentary evidence that goods used as inputs or capital goods for manufacture of welding electrodes - period June, 2006 to March, 2007 - appellant is in appeal on the ground that in view of the finding of ld. Commissioner (Appeals) that there is no malafide and/or contumacious conduct on the part of the appellant, extended period of limitation is also not available to revenue as the whole demand relate to the period beyond one year from the date of show cause notice being 27.1.2009. Held that - I am satisfied that the extended period of limitation is not invokable in the facts and circumstances of the case. Accordingly I hold that the Show Cause Notice is bad and the impugned order is set aside to the extent it have confirmed the disallowance of Cenvat credit for ₹ 2,30,256/-. - Decided in favour of appellant with consequential benefits

Summary

Issues involved: Cenvat credit disallowance for the period June 2006 to March 2007, interpretation of whether certain goods qualify as inputs or capital goods for the manufacture of welding electrodes, justification of penalty under Cenvat Credit Rules, sufficiency of evidence supporting the use of goods in the manufacturing process, applicability of extended period of limitation for revenue.

Analysis:

1. Cenvat Credit Disallowance: The appellant, a manufacturing company, was in appeal against the disallowance of Cenvat credit amounting to ?2,30,256 for the period between June 2006 to March 2007. The Revenue contended that goods such as angles, plates, channels, and joists, on which the credit was availed, were neither inputs nor capital goods for the manufacture of welding electrodes. The appellant, however, argued that these goods were essential in the manufacturing process. The Tribunal noted the appellant's explanation regarding the use of these goods in various stages of production and their relevance to the final product. The Tribunal ultimately held that the extended period of limitation was not applicable in this case and set aside the disallowance of Cenvat credit, granting the appellant consequential benefits.

2. Interpretation of Goods Usage: The dispute revolved around whether the goods in question, namely angles, plates, channels, and joists, were legitimately used in the manufacturing process of welding electrodes. The appellant provided a detailed explanation of how each type of goods was utilized in different stages of production, such as wire frames, trolleys, and stands. However, the Tribunal observed that the appellant failed to provide documentary evidence, like diagrams or floor charts, demonstrating the installation or use of these goods in their factory. Despite the appellant's argument that the goods were used in relation to the manufacture of the final product, the absence of concrete evidence led to the disallowance of Cenvat credit.

3. Penalty Justification: The Revenue proposed a penalty under Rule 15 of Cenvat Credit Rules, contending that the appellant's availing and utilization of the credit was irregular. However, the Tribunal, after considering the facts on record, found no evidence of malafide intention on the part of the appellant. Consequently, the penalty imposed was deemed unjustified and thus deleted by the Tribunal.

4. Extended Period of Limitation: The appellant challenged the applicability of the extended period of limitation, arguing that there was no malafide conduct involved and, therefore, the revenue could not invoke the extended period for demands beyond one year from the date of the show cause notice. The Tribunal agreed with the appellant's argument and held that the extended period of limitation was not applicable in this case, leading to the setting aside of the impugned order confirming the disallowance of Cenvat credit.

In conclusion, the judgment by the Appellate Tribunal CESTAT ALLAHABAD addressed the issues of Cenvat credit disallowance, interpretation of goods usage in manufacturing processes, penalty justification, and the applicability of the extended period of limitation. The Tribunal's decision favored the appellant by setting aside the disallowance of Cenvat credit and highlighting the importance of providing concrete evidence to support claims in such cases.