CENVAT credit on steam-generation inputs and limitation turned on disclosure and conflicting judicial views, with demand failing on time bar.

CENVAT credit on furnace oil used to generate steam was held inadmissible to the extent the steam was transferred from one unit to another unit situated in the same plot, following the jurisdictional High Court view that separately registered units are to be treated distinctly for proportionate credit purposes. On limitation, the extended period was held unavailable because the relevant facts had been disclosed in ER-2 returns and the issue was subject to conflicting judicial views, so suppression or wilful misstatement was not established. The demand therefore failed on limitation and consequential relief followed.

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Issues: (i) Whether CENVAT credit on furnace oil used for generation of steam in one unit was admissible when a part of the steam was transferred to another unit situated in the same plot. (ii) Whether the extended period of limitation could be invoked in the facts of the case.

Issue (i): Whether CENVAT credit on furnace oil used for generation of steam in one unit was admissible when a part of the steam was transferred to another unit situated in the same plot.

Analysis: The competing views were considered on the meaning of use of inputs for generation of steam or electricity and on whether adjoining units in the same compound could be treated as one factory. One view treated separately registered units as distinct factories and denied proportionate credit to the extent steam or electricity was wheeled out. Another view treated units in the same plot as part of the same factory premises and allowed credit on inputs used for steam or electricity consumed across those units. Following the jurisdictional High Court view, the Tribunal held that the appellant was not entitled to proportionate credit relatable to the steam transferred to Unit-II.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether the extended period of limitation could be invoked in the facts of the case.

Analysis: The period in dispute was one on which there were conflicting judicial views, and the appellant had disclosed the relevant facts in ER-2 returns. In such circumstances, suppression or wilful misstatement was not established, and the longer limitation period was held to be unavailable.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: Though the credit issue was answered against the assessee, the demand failed on limitation, the impugned order was set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the relevant facts are fully disclosed and the legal position on admissibility of credit is under conflicting judicial views, the extended period of limitation cannot be invoked.

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