Revenue's appeal dismissed as CENVAT credit demand on captive power plant capital goods time-barred under normal limitation period

CESTAT Ahmedabad dismissed Revenue's appeal regarding CENVAT credit on capital goods used in captive power plant installed outside factory premises for period June 2012 to December 2012. The respondent had disclosed installation of capital goods at factory premises through correspondence and ER-1 returns, with department issuing certificate acknowledging the facts. Since no suppression of facts occurred and show cause notice was issued on 31.03.2015 (over two years after credit availment), demand was time-barred under normal limitation period of one year. Adjudicating authority correctly dropped proceedings on limitation grounds.

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Issues Involved:
The issues involved in the judgment are the availing of cenvat credit on capital goods for installation of a power plant under EPCG license, the eligibility of such credit under the Cenvat Credit Rules, 2004, and the applicability of the extended period for demanding the cenvat credit.

Issue 1: Availment of Cenvat Credit on Capital Goods for Power Plant Installation
The respondent, engaged in manufacturing polyester filament yarn, availed cenvat credit on capital goods for installing a power plant under an EPCG license. The department contended that the credit availed on the power plant was incorrect as it was installed outside the factory for captive use, which was deemed impermissible as capital goods. The department argued that the rules were amended in 2011 to make duty paid on such capital goods eligible for cenvat credit, but the respondent availed the credit before this amendment. A show cause notice was issued in 2015 demanding the cenvat credit availed during 2012-2013, invoking the extended period. The adjudicating authority dropped the proceedings against all notices, leading to the Revenue's appeal.

Issue 2: Applicability of Cenvat Credit Rules and Limitation
The Revenue contended that the credit on capital goods installed outside the factory for electricity generation was not allowed during the period when the goods were received, as per the Cenvat Credit Rules prevailing at that time. The respondent argued that the credit was taken after the amendment in 2011 and that the rules in force at the time of credit availing should apply. The respondent also highlighted that the department was informed about the cenvat credit availed on the capital goods, and there was no suppression of facts. The bench found that the demand for cenvat credit was time-barred, as the department had knowledge of the installation of capital goods and the credit availed by the respondent, making the demand under the extended period invalid.

Conclusion:
The appellate tribunal upheld the impugned order, dismissing the Revenue's appeal on the grounds that the demand for cenvat credit was not sustainable due to the limitation issue. The bench found that the department had knowledge of the facts regarding the installation of capital goods and the cenvat credit availed, and therefore, the demand made under the extended period was incorrect. The judgment emphasized that without delving into the merits of the case, the demand for cenvat credit could not stand solely on the grounds of limitation.

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