2016 (7) TMI 631 - AT - Central Excise

Supreme Court Upholds CENVAT Credit for Machinery Parts

CCE & ST, Tirupati Versus M/s. Manishreni Ferro Alloys Pvt. Ltd.

The Supreme Court upheld the Commissioner (Appeals) decision allowing CENVAT credit for items used in machinery fabrication. The Court applied the user ... Irregular credit on MS Beam, MS Channels, MS Sections, TMT bars, HR sheets, HR coils, welding electrodes - extended period of limitation invoked - suppression of fact - Held that:- Undisputedly the appellant has furnished returns (ER-1) and also filed details of the credit availed. There is no provision/column in the ER-1 return to mention the prupose/place of use of inputs/capital goods. When returns are filed, it is for the proper officer to conduct scrutiny of the returns and inform the assessee about defects. If the assessee disputes a show cause notice can be issued within the normal period. In the present case Revenue has not stated what prevented the proper officer from conducting scrutiny of returns and issuing show cause within normal period. The Commissioner (Appeals), in my view has rightly applied the judgment rendered by Hon’ble Apex Court in the case of Continental Foundation Jt Venture Vs CCE, Chandigarh-1 [2007 (8) TMI 11 - SUPREME COURT OF INDIA ] wherein held that mere omission to give correct information is not suppression of facts Revenue has miserably failed to establish the allegation of suppression of facts. In such circumstances, the demand raised invoking extended period is unsustainable. - Decided in favour of assessee. Issues:- Appeal against order setting aside demand, interest, and penalty.- Admissibility of CENVAT credit on certain items.- Applicability of user test for credit on MS items.- Time-barred demand and alleged suppression of facts.Admissibility of CENVAT Credit:The respondent, engaged in manufacturing Ferro silicon, availed CENVAT credit on various items, including MS Beam, MS Channels, TMT bars, etc., from April 2008 to June 2011. The Commissioner (Appeals) accepted the credit based on evidence like a certificate from a Chartered Engineer and photographs showing the use of these items in machinery fabrication. The original authority denied credit citing a previous decision. The Tribunal referred to a case where a larger bench decision was deemed no longer valid due to a subsequent judgment by the Apex Court. The Apex Court applied the user test, allowing credit on MS items used in specific machinery fabrication. The argument against admissibility based on unsigned photographs was rejected as the department failed to prove diversion of items.Time-Barred Demand and Suppression of Facts:The Revenue challenged the time-barred nature of the demand, issued in 2012 for the period from 2008 to 2011. They claimed that although credit availing was reported, the purpose/place of use was not disclosed. The Tribunal disagreed, noting that the appellant had filed required returns and credit statements, with no obligation to specify use locations in the returns. The Revenue's failure to scrutinize returns promptly and issue a show cause notice within the normal period led to the demand being considered time-barred. Citing legal precedents, the Tribunal emphasized that mere non-declaration does not justify an extended limitation period. As the show cause notice was based on filed returns and no suppression of facts was proven, the demand invoking an extended period was deemed unsustainable. The Commissioner (Appeals) decision was upheld, dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the Commissioner (Appeals) decision to allow CENVAT credit based on evidence provided and dismissed the Revenue's appeal due to the time-barred nature of the demand and lack of evidence supporting suppression of facts.