CENVAT credit eligibility on capital goods must be decided first before limitation is examined in a fresh adjudication

CENVAT credit on capital goods allegedly intended exclusively for manufacturing exempted goods had to be examined first, because that threshold eligibility issue was the foundation of the Revenue's challenge. The adjudicating authority erred by moving straight to limitation for part of the demand without deciding admissibility of credit on merits. As the core issue remained unadjudicated, the matter required fresh consideration of all relevant issues on remand.

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Issues: Whether the adjudicating authority was required first to decide the Revenue's challenge to the admissibility of CENVAT credit on capital goods allegedly intended for exclusive use in the manufacture of exempted goods, before examining the plea of limitation.

Analysis: The dispute turned on the basic eligibility of the capital goods for CENVAT credit, as the Revenue's case was that the machinery was meant exclusively for the manufacture of agglomerated iron ore attracting nil duty. The adjudicating authority did not decide that threshold issue and instead proceeded directly to limitation for part of the demand. Since the foundational merit issue had not been examined, the order could not stand as a proper adjudication on all relevant questions.

Conclusion: The matter had to be remanded for fresh adjudication on all relevant issues, and the appeal succeeded.

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