Revenue-neutral CENVAT credit and tariff classification do not by themselves justify extended limitation or denial of credit.

Revenue-neutral CENVAT credit disputes require specific allegations of suppression, wilful misstatement, or mala fide intent before the extended limitation period can be applied; a notice that itself reflects later availability of credit weakens any inference of deliberate evasion. Tariff classification under Chapters 82, 84, 85 or 90 does not by itself make an item capital goods: where goods are consumed in the manufacturing process, are not capitalised in the books, and do not yield enduring benefit, credit should not be denied merely on heading. The note concludes that revenue neutrality and substance over tariff label are the governing principles.

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Issues: (i) Whether the extended period of limitation could be invoked when the disputed CENVAT credit issue was revenue-neutral and the notice did not disclose mala fides, suppression, or wilful misstatement; (ii) Whether the disputed goods, though classifiable under Chapters 82, 84, 85 and 90, were capital goods so as to deny CENVAT credit.

Issue (i): Whether the extended period of limitation could be invoked when the disputed CENVAT credit issue was revenue-neutral and the notice did not disclose mala fides, suppression, or wilful misstatement.

Analysis: The dispute arose from availment of CENVAT credit on items used in the manufacturing process, and the show-cause notice itself recorded that the amount need not be recovered because the remaining credit would be available later, indicating revenue neutrality. In such circumstances, the Revenue had the burden to establish suppression, wilful misstatement, or mala fide intention for invoking the extended period. The notice and the orders below did not record any specific material showing deliberate evasion, and the demand was issued long after the audit period. Revenue neutrality negatived an inference of fraudulent intent.

Conclusion: The extended period of limitation was not sustainable and was wrongly invoked.

Issue (ii): Whether the disputed goods, though classifiable under Chapters 82, 84, 85 and 90, were capital goods so as to deny CENVAT credit.

Analysis: Mere classification of goods under the cited tariff chapters did not automatically make them capital goods. The goods were found to be consumed in the manufacturing process, were not capitalised in the books, and did not provide any enduring benefit. On these facts, and in light of the cited Tribunal view, they could not be treated as capital goods merely because of their tariff heading. The assessee's entitlement to credit therefore remained intact on merits.

Conclusion: The disputed goods were not to be treated as capital goods for denying CENVAT credit, and the assessee's claim succeeded on merits.

Final Conclusion: The appeal succeeded on limitation as well as on merits, and the assessee was entitled to consequential relief.

Ratio Decidendi: Where the demand is revenue-neutral and the show-cause notice lacks specific allegations establishing suppression or wilful misstatement, the extended period cannot be invoked; further, tariff classification alone does not determine capital goods status unless the goods answer that description in substance.

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