Cenvat credit on fabrication steel and welding electrodes allowed; extended limitation period not invokable in bona fide dispute

Cenvat credit was held admissible on steel items used to fabricate structures embedded to earth and necessary for installation of plant and machinery, as well as on welding electrodes used for repairs and maintenance of plant and machinery engaged in production. The Tribunal followed prior decisions recognising credit on such inputs used in the factory for manufacture of excisable goods. It also held that the extended period of limitation was not invokable because the admissibility of credit was under bona fide dispute during the relevant period, so suppression or wilful misstatement could not be inferred. The demand therefore failed on both merits and limitation.

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Issues: (i) Whether Cenvat credit was admissible on steel items used for fabrication of structures embedded to earth and necessary for installation of plant and machinery, and on welding electrodes used for repairs and maintenance of plant and machinery; (ii) Whether the extended period of limitation could be invoked for the demand.

Issue (i): Whether Cenvat credit was admissible on steel items used for fabrication of structures embedded to earth and necessary for installation of plant and machinery, and on welding electrodes used for repairs and maintenance of plant and machinery?

Analysis: The Tribunal followed earlier decisions allowing credit on steel items used for fabrication of supporting structures, and on inputs used in the factory for manufacture of excisable goods. It held that the steel items were used for fabrication of structures necessary for installation of plant and machinery, and that welding electrodes were used for repairs and maintenance of plant and machinery engaged in production.

Conclusion: Cenvat credit was admissible on both the steel items and the welding electrodes, in favour of the assessee.

Issue (ii): Whether the extended period of limitation could be invoked for the demand?

Analysis: The availability of credit on the goods in question was subject to contrary views during the relevant period. In such circumstances, suppression or wilful misstatement could not be inferred, and the demand was founded wholly on invocation of the extended period.

Conclusion: The extended period of limitation was not invokable, in favour of the assessee.

Final Conclusion: The impugned demand could not be sustained either on merits or on limitation, and the appeal was allowed with consequential relief.

Ratio Decidendi: Cenvat credit is admissible on goods used for fabrication of structures necessary for installation of plant and machinery and on welding electrodes used for repairs and maintenance, and the extended period cannot be invoked where the issue was under bona fide dispute during the relevant period.

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