CENVAT credit on steel used for capital goods and absence of suppression barred extended limitation and penalty.

CENVAT credit was treated as admissible on steel items substantiated as used in the manufacture of capital goods, where the assessee supported its claim with a Chartered Engineer's certificate and ER-1 returns and no proper contrary appraisal was made of that evidence. The extended limitation period was held unavailable because the utilization details had already been disclosed in statutory returns and no suppression of facts or intent to evade duty was shown. On that basis, the demand and penalty were considered unsustainable, and the assessee succeeded on both credit eligibility and limitation.

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Issues: (i) Whether CENVAT credit was admissible on steel items used for manufacture of capital goods and whether the department had wrongly disallowed the credit on the footing that the items were used in building and supporting structures. (ii) Whether the demand and penalty were barred by limitation for want of suppression or intent to evade duty.

Issue (i): Whether CENVAT credit was admissible on steel items used for manufacture of capital goods and whether the department had wrongly disallowed the credit on the footing that the items were used in building and supporting structures.

Analysis: The record showed that the assessee claimed credit only on the portion of steel used in manufacture of capital goods and not on the portion attributable to building and supporting structure. The assessee had placed reliance on the Chartered Engineer's certificate and the ER-1 returns, which indicated utilization of the steel for capital goods. The appellate authority did not properly consider this evidence. On the material available, the claim that credit was taken on steel used in the manufacture of capital goods stood substantiated.

Conclusion: The credit on the relevant steel items was held to be admissible in favour of the assessee.

Issue (ii): Whether the demand and penalty were barred by limitation for want of suppression or intent to evade duty.

Analysis: The show cause notice was issued long after the credit had been taken, while the relevant utilization particulars had already been disclosed in the statutory returns. No evidence was brought on record to establish suppression of facts or any deliberate intent to evade duty. In the absence of such evidence, invocation of the extended period was not justified and the consequential demand and penalty could not survive.

Conclusion: The demand was held to be time-barred and the penalty unsustainable in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the assessee succeeding on both admissibility of credit and limitation.

Ratio Decidendi: CENVAT credit cannot be denied when the assessee substantiates that the goods were used in manufacture of capital goods, and the extended period of limitation is unavailable in the absence of evidence of suppression of facts or intent to evade duty.

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