2023 (3) TMI 887 - AT - Central Excise

CENVAT Credit - capital goods or not - structural steel used for erection of poles for transmission of electricity from MSEB feeder to factory and vice versa and for supporting other capital goods - delay in issuance of SCN - time limitation - HELD THAT - No justification has been provided by the department regarding the delay in issuing the show cause notice. Although the alleged irregularity has come to the notice of the department in the month of March, 2014 and the statement were also recorded during that month only, but still the show cause notice was issued much belatedly on 29.4.2016 without assigning any reasons for delay in issuance. In view of precedents by virtue of various decisions of this Tribunal the same ought to have issued within one year from the date of the knowledge about the alleged irregularity - no suppression can be alleged against the appellant and extended period cannot be invoked nor the penalty be imposed on that count. Since complete information was given in statutory returns the normal period of one year would be applicable whereas the proceedings are initiated at a later date and hence the demand is barred by limitation. Credit availed by the appellants on MS Angles, MS Beams, MS channels and poles for wire for transmission of electricity from MSEB feeder to the factory manufacturing sugar and vice versa - denied on the ground that it is outside factory premises and not eligible capital goods - HELD THAT - It is not disputed that the poles etc. were used for supplying electricity in the factory for the purpose of manufacture sugar and it s by product molasses etc. For running the machinery electricity is essential without which there will be no production. The poles might be outside the factory but for the purpose of manufacturing activity inside the factory. The location is not of much relevance here but the purpose. Steel items - HELD THAT - It is the case of the appellant that they have been used for supporting structure of the machinery and also for erection of poles for transmission of electric energy from MSEB feeder to factory and vice versa and since nothing contrary has been produced on record anywhere therefore in my view the same is treatable as accessories and would fall within the definition of capital goods as provide by Section 2(a) ibid being the components/ parts/accessories of the capital goods which are specifically covered within the definition irrespective of its classification. Therefore the credit of Rs.2,49,920/- availed on MS Beam, MS channels is also admissible. The demand is set aside on merits as well as on the ground of limitation - Appeal allowed.

Summary

Issues Involved:
The appeal challenges the order upholding a demand for Cenvat credit availed on structural steel. The main issue is whether the credit availed by the appellant on structural steel used for various purposes is admissible under the Cenvat credit rules.

Details of the Judgment:

Issue 1: Delay in Issuing Show Cause Notice
The department issued a show cause notice to deny and recover Cenvat credit, invoking the extended period of limitation. The appellant argued that the notice was issued belatedly without justification for the delay. The Tribunal held that the notice should have been issued within one year from the knowledge of the alleged irregularity. Since the appellant had declared the credit in their records and statutory returns, no suppression could be alleged, and the extended period could not be invoked. Therefore, the demand was deemed barred by limitation.

Issue 2: Admissibility of Cenvat Credit on Steel Items
The appellant availed Cenvat credit on various steel items used for supporting structures of machinery and for erecting poles for electricity transmission. The department denied the credit, stating the items were outside the factory premises and not eligible as capital goods. The Tribunal found that the items were essential for manufacturing activities inside the factory, directly related to the production of the final product. Therefore, the credit on these items was deemed admissible under Rule 2(a) of the Cenvat credit rules. The Tribunal also considered the steel items as accessories falling within the definition of capital goods, making the credit availed on them also admissible.

Conclusion:
The Tribunal set aside the demand on both merit and limitation grounds, allowing the appeal with consequential relief as per law. The impugned order was overturned, and the appeal was granted in favor of the appellant.

Separate Judgment:
The judgment was pronounced in open court on 16.03.2023 by Mr. Ajay Sharma, Member (Judicial) of the Appellate Tribunal CESTAT Mumbai.