2017 (3) TMI 231 - AT - Central Excise

Court allows appeal on admissibility of credit for capital goods. Extended period notice unsustainable.

The appeal was allowed in favor of the appellants. The court found that the credit availed on MS items categorized as capital goods was admissible as they ... Cenvat credit - Capital goods - MS Beams, Channels, Plates etc - Penalty - Time limitation - Held that: - The Hon'ble High Court of Madras in the case of India Cements Ltd., Vs CE, Chennai[ 2015 (3) TMI 661 - MADRAS HIGH COURT ] has held that MS items used for erection of capital goods is eligible for credit - I find that the show cause notice issued invoking the extended period is also unsustainable - Appeal allowed. Issues: Disallowance of credit availed on MS Beams, Channels, Plates under the category of capital goods.Analysis:1. The case involved the disallowance of credit availed on MS items categorized as capital goods by the appellants engaged in the manufacture of bulk drugs for the period January 2007 to June 2009.2. The department issued a show cause notice demanding an amount along with interest and penalty, which was confirmed by the original authority and upheld by the Commissioner (Appeals), leading to the current appeal.3. The appellant's counsel argued that the MS items were used in fabricating supporting structures for Reactors necessary for manufacturing final products, citing relevant judgments like India Cements Ltd., Ultratech Cements Ltd., and Kalindi Ispat Pvt Ltd.4. The appellant contended that they disclosed the credit availed in statutory registers, and the show cause notice invoking the extended period was not justified, referencing the Vandana Global Ltd. case and the subsequent judgment in Mundra Ports and SEZ Ltd.5. The respondent argued that the appellants did not provide adequate details in their filings, leading to suppression, and supported the denial of credit by the authority below.6. The judge noted that the period in question was before a specific amendment date and that the retrospective application of the amendment was disputed based on various judgments, including the one in Mundra Ports and SEZ Ltd.7. The judge found that the MS items were essential for erecting Reactors, as confirmed by the High Court of Madras in the India Cements Ltd. case, making the credit admissible, and the disallowance unjustified.8. It was concluded that there was no evidence of suppression by the appellants, rendering the show cause notice invoking the extended period unsustainable, leading to the setting aside of the impugned order and allowing the appeal with consequential reliefs.