2025 (4) TMI 754 - AT - Central Excise

Wrongful availment of Cenvat credit - inputs used for manufacture of Aluminium Bus Bars and Anode Stem within the factory which in turn was captively consumed as capital goods for supply of heavy electric current and for electrolysis respectively in the pot line for the manufacture of dutiable final product i.e. Aluminium metal - invocation of extended period of limitation - HELD THAT - The issue as to whether cenvat can be availed on the intermediate product when the same is exempted is no more re integra. Dealing with such CENVAT Credit under the provisions of erstwhile Rule 57 of the Central Excise Rues 1944 the Delhi Tribunal in the case of HINDALCO INDUSTRIES LIMITED VERSUS COMMR. OF C. EX. ALLAHABAD 2002 (5) TMI 180 - CEGAT NEW DELHI held that the well settled position about what is intermediate product and having regard to the fact that the appellants in their Form-I form (C/List) shows that bus-bar is captively consumed. We have no doubt in our mind that bus-bar is an intermediate product and is eligible to the benefit of credit of input itself in terms of Rule 57D(2) of C. Ex. Rules 1944. - the impugned order is set aside on merits and the Appeal is allowed. Extended period of limitation - HELD THAT - There are considerable force in the appellant s argument that the Show Cause Notice issued on 1.10.2004 for the CENVAT Credit taken during April 2000 to February 2001 is time barred. The appellant is an assessee since 1997 and has been taking the credit and filing the Returns. The case laws in respect of the CENVAT Credit eligibility on exempted intermediate goods are in favour of the party. Therefore the Department has not made any case of suppression on the part of the appellant to fasten the extended period demand liability. Therefore the demand is set aside even on account of time bar. Conclusion - i) The Appellant is entitled to CENVAT credit on the inputs used for manufacturing exempted intermediate products that were further used in dutiable final products. ii) The demand also set aside on the grounds of time bar finding the extended period of limitation inapplicable. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether CENVAT credit can be availed on inputs used in the manufacture of capital goods when such capital goods are exempted from duty but are further used in the manufacture of dutiable final products.
Whether the extended period of limitation is applicable for the demand of CENVAT credit availed during April 2000 to February 2001, given the alleged suppression of facts by the Appellant.
Whether the delay in adjudication of the Show Cause Notice (SCN) affects the validity of the proceedings.
Whether the demand is revenue neutral, thereby affecting the justification for denial of credit.

ISSUE-WISE DETAILED ANALYSIS

1. CENVAT Credit on Exempted Intermediate Products

Relevant Legal Framework and Precedents: The case hinges on the interpretation of Rule 57D(2) of the erstwhile Central Excise Rules, which allowed credit on inputs used in the manufacture of intermediate products, even if exempt from duty. The Tribunal referenced past decisions, including those in the cases of Hindalco Industries Ltd. and TISCO, establishing that intermediate products used captively in the manufacture of dutiable final products are eligible for CENVAT credit.
Court's Interpretation and Reasoning: The Tribunal found that the Aluminium Bus Bars and Anode Stems, although exempted, were intermediate products used in the manufacture of dutiable aluminium. The Tribunal emphasized that the same product might be a final product in one context and an intermediate product in another, depending on its use.
Key Evidence and Findings: The Appellant's classification list indicated the use of bus bars in the manufacture of aluminium, supporting the claim that these were intermediate products.
Application of Law to Facts: The Tribunal applied the principle that intermediate products used in further manufacturing processes within the same factory are eligible for credit, aligning with Rule 57D(2).
Treatment of Competing Arguments: The Tribunal dismissed the Department's argument that the exemption of intermediate products precluded credit eligibility, citing consistent judicial precedents supporting the Appellant's position.
Conclusions: The Tribunal concluded that the Appellant is entitled to CENVAT credit on the inputs used for manufacturing exempted intermediate products that were further used in dutiable final products.

2. Extended Period of Limitation

Relevant Legal Framework and Precedents: The extended period of limitation is applicable in cases of suppression, misstatement, or fraud. The Tribunal referenced the Appellant's consistent filing of classification lists since 1997 as evidence against suppression.
Court's Interpretation and Reasoning: The Tribunal found no evidence of suppression, noting that the Department was aware of the Appellant's manufacturing processes and the use of intermediate products.
Key Evidence and Findings: The Tribunal noted the Appellant's reliance on previous Tribunal rulings to support their bona fide belief in the eligibility of CENVAT credit.
Application of Law to Facts: The Tribunal applied the principle that the absence of suppression or misstatement negates the applicability of the extended limitation period.
Treatment of Competing Arguments: The Tribunal rejected the Department's assertion of suppression, finding no basis for invoking the extended period.
Conclusions: The Tribunal set aside the demand on the grounds of time bar, finding the extended period of limitation inapplicable.

3. Delay in Adjudication

Relevant Legal Framework and Precedents: The principle of natural justice requires timely adjudication. The Tribunal cited rulings that prolonged delays can vitiate proceedings.
Court's Interpretation and Reasoning: The Tribunal acknowledged the unreasonable delay of over 13 years in adjudication as prejudicial to the Appellant.
Key Evidence and Findings: The Tribunal found the delay unjustified and detrimental to the Appellant's ability to defend against the SCN.
Application of Law to Facts: The Tribunal applied the principle that excessive delay undermines the fairness of proceedings.
Treatment of Competing Arguments: The Tribunal found no justification from the Department for the delay, supporting the Appellant's claim of prejudice.
Conclusions: The Tribunal set aside the proceedings due to the delay, citing a violation of natural justice.

4. Revenue Neutrality

Relevant Legal Framework and Precedents: The concept of revenue neutrality suggests that if the net revenue impact is zero, the denial of credit may be unjustified.
Court's Interpretation and Reasoning: The Tribunal accepted the Appellant's argument that the demand was revenue neutral, as duty paid on capital goods could be offset by credit on final products.
Key Evidence and Findings: The Tribunal found that the Appellant could have structured transactions to result in no net revenue loss.
Application of Law to Facts: The Tribunal applied the principle that revenue neutrality negates the rationale for denying credit.
Treatment of Competing Arguments: The Tribunal found the Department's position on revenue impact unconvincing.
Conclusions: The Tribunal concluded that the demand was unjustified due to revenue neutrality.

SIGNIFICANT HOLDINGS

The Tribunal held that "the same product may be a final product in respect of particular goods but may be intermediate product in relation to others," supporting the eligibility of CENVAT credit on intermediate products.
The Tribunal emphasized that "captive consumption by itself shows that the product, which is captively consumed, is an intermediate," affirming the credit eligibility for such products.
The Tribunal set aside the impugned order, allowing the appeal on both merits and limitation, and recognized the Appellant's eligibility for consequential relief.

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