2017 (3) TMI 1072 - AT - Central Excise

CENVAT credit - manufacture of steel ingots - eligible inputs and capital goods - Held that - The Hon ble Supreme Court in the case of Commissioner of Central Excise, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (7) TMI 12 - SUPREME COURT OF INDIA has held that steel plates and MS channels used in fabrication of chimney for diesel generating set are eligible, cenvatable items. Extended period of limitation - Held that - appreciating the fact that law was not clear during the relevant period as also by appreciating the fact that the entire credit was being availed after reflecting the same in the statutory records and after filing the due returns, the demand is hit by bar of limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit on iron and steel products for manufacturing capital goods.
2. Dispute regarding limitation period for raising demands.

Analysis:
1. The appellant, engaged in manufacturing steel ingots, availed Cenvat credit on various iron and steel products during 2005-2008, claiming they were used in manufacturing capital goods. The appellant reflected this credit in Cenvat account and stock records, issuing invoices for captive consumption. However, an audit objection led to a show cause notice proposing credit denial and penalties. Despite contesting the notice on merits and limitation, lower authorities upheld demands and penalties, prompting the appeal.

2. The appellant argued that the iron and steel items were indeed used in manufacturing capital goods, supported by a Chartered Engineer's certificate. Citing legal precedents, including a Supreme Court ruling and a Tribunal decision, it was established that steel items used in fabricating capital goods are eligible for credit. Moreover, the demand was found to be time-barred, as it was raised using an extended period. The Tribunal's decision in a similar case highlighted that if the law was unclear during the relevant period and the assessee acted in good faith by reflecting credits in records and returns, the longer limitation period would not apply.

3. Considering the unclear legal landscape during the relevant period, the lack of malafide intent by the appellant, and the proper documentation of credit availed, the demand was deemed to be barred by limitation. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, emphasizing the importance of the limitation period in tax disputes.