Cenvat credit on steel plates for plant repair cannot be denied on a new ground not raised in the show cause notice.

MS plates, MS sheets and similar items used for repair and maintenance of existing plant and machinery were held eligible for Cenvat credit. A denial based on a new allegation that the items were used for supporting structures and foundations could not be sustained where that basis was not set out in the show cause notice. The appellate stage could not introduce a different factual ground for disallowance. The note also records that the issue was covered by decisions recognising credit on steel plates used for repair and maintenance of plant and machinery, so the denial of Cenvat credit was not sustainable and the appeal was allowed.

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Issues: Whether MS plates, MS sheets and similar items used for repair and maintenance of existing plant and machinery were eligible for Cenvat credit, and whether the department could sustain a denial on the basis that the items were used for supporting structures and foundations when that allegation was not made in the show cause notice.

Analysis: The items were alleged in the show cause notice to have been used for repair and maintenance or modification of the existing plant and machinery. The appellate finding that they were used for construction of supporting structures and foundation introduced a case different from the one pleaded in the notice. Such a new basis for denial could not be raised at the appellate stage. On merits, the issue stood covered by the decisions holding that steel plates used for repair and maintenance of plant and machinery are eligible for Cenvat credit.

Conclusion: The denial of Cenvat credit was not sustainable. The impugned orders were set aside and the appeal was allowed.

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