Cenvat credit on capital goods fails when entitlement is judged on the receipt date, with extended limitation upheld for non-disclosure.

Cenvat credit on capital goods depends on the eligibility position prevailing on the date of receipt, so goods received while the assessee was under the compounded levy scheme did not give rise to credit even though the assessee later opted out and took credit thereafter. The later change in duty status did not create a fresh entitlement. On limitation, disclosure of credit in monthly returns was insufficient because the department was not informed of the earlier receipt and installation of the capital goods, so suppression was inferred and the extended period was available. The denial of credit, consequential demand and penalty were maintained.

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Issues: (i) whether Cenvat credit on capital goods was admissible when the goods were received during the period when the assessee was under the compounded levy scheme, even though credit was taken later after opting out of that scheme; (ii) whether the demand was barred by limitation and the extended period was wrongly invoked.

Issue (i): Whether Cenvat credit on capital goods was admissible when the goods were received during the period when the assessee was under the compounded levy scheme, even though credit was taken later after opting out of that scheme.

Analysis: Eligibility to credit was held to depend on the dutiability of the final product on the date of receipt of the capital goods. The capital goods had been received when the assessee was under the compounded levy scheme and was not entitled to take credit on inputs or capital goods under the applicable notification and rules. The subsequent shift to duty payment did not create a fresh entitlement to credit, because the relevant date remained the date of receipt of the capital goods.

Conclusion: The credit was not admissible and the finding is against the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period was wrongly invoked.

Analysis: The credit was taken in March 2002, while the department did not have knowledge from the returns that the capital goods had been received earlier during the ineligible period. Disclosure of credit in monthly returns did not establish full disclosure of the receipt and installation of the capital goods so as to rule out suppression. On that basis, the extended period was held to be available.

Conclusion: The demand was held to be within limitation and the finding is against the assessee.

Final Conclusion: The appeal failed on both credit eligibility and limitation, and the order denying credit with consequential demand and penalty was maintained.

Ratio Decidendi: Cenvat credit on capital goods is governed by the eligibility position prevailing on the date of receipt of the capital goods, and the extended period can be invoked where material facts about receipt and use of the goods were not fully disclosed.

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