2012 (1) TMI 154 - AT - Central Excise

Tribunal overturns orders, grants relief to appellants due to time-barred show cause notice

The Tribunal set aside the impugned orders, allowing the appeals and providing consequential relief to the appellants. It held that the show cause notice ... CENVAT credit - goods returned - time limitation - Whether the Show Cause Notice issued on 22-9-2004 has to be held as time barred? - Whether the fact that Rule 7(l)(b) as it existed in the statute book at the time of issue of Show Cause Notice can be invoked for considering applicability of extended period? - difference of opinion - scrutiny of assessment - Held that: - In view of the majority order, the impugned orders are set aside and the appeals are allowed with consequential relief to the appellants - credit allowed - appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the show cause notice issued on 22-09-2004 was time-barred.2. Applicability of Rule 7(1)(b) of Cenvat Credit Rules, 2002 for invoking the extended period.3. Interpretation of the Commissioner (Appeals) observations regarding ignorance of law.4. Relevance of non-production of invoices and the supplier being a sister company for invoking the extended period.5. Penalties on the authorized signatory and the director.6. Penalty on the company.Issue-Wise Detailed Analysis:1. Time-Barred Show Cause Notice:The primary issue was whether the show cause notice issued on 22-09-2004 was time-barred. The appellants argued that the notice was issued beyond the normal period of limitation as the credit was availed on 27-12-2001, and the show cause notice was issued on 22-09-2004. The Tribunal found that the credit particulars were reflected in statutory records (RG 23-A Part-1), and there was no suppression or misstatement with an intent to evade duty. The Tribunal held that the demand was barred by limitation and set aside the impugned order confirming duty and imposing penalties on all appellants.2. Applicability of Rule 7(1)(b):The Tribunal examined whether Rule 7(1)(b) of the Cenvat Credit Rules, 2002, which mandates that credit cannot be availed if the supplementary invoice was issued due to fraud, collusion, or suppression of facts, was applicable. The Tribunal noted that the appellant was not aware of the circumstances under which the supplementary invoice was issued. The Tribunal held that the appellant's ignorance of the reasons for the supplementary invoice issuance could not be held against them, and the extended period could not be invoked.3. Ignorance of Law:The Tribunal analyzed whether the Commissioner (Appeals) had accepted the plea of ignorance of law by the appellants. The Commissioner (Appeals) had observed that the appellants should have verified the reasons for the differential duty payment. However, the Tribunal found that ignorance of law was not a sufficient ground for invoking the extended period and that the Commissioner (Appeals) had not specifically attributed any mala fide to the appellant.4. Non-Production of Invoices and Sister Company Relationship:The Tribunal considered whether the non-production of invoices and the fact that the supplier was a sister company were relevant factors for invoking the extended period. The Tribunal held that the entry in statutory records was sufficient to hold that the extended period could not be invoked. The Tribunal also noted that the appellant had filed all necessary returns and records, and there was no requirement to submit copies of invoices.5. Penalties on Authorized Signatory and Director:The Tribunal examined the penalties imposed on the authorized signatory and the director. The Commissioner (Appeals) had reduced the penalties on the authorized signatory and the director. The Tribunal, considering the circumstances, reduced the penalties to Rs. 5,000 each, noting that the case did not involve clandestine removal or deliberate violation of the law.6. Penalty on the Company:The Tribunal reviewed the penalty imposed on the company. The Tribunal, in agreement with the Member (Judicial), held that the entire demand was time-barred, and consequently, there was no basis for imposing a penalty on the company. The penalties were set aside, and the appeals were allowed with consequential relief to the appellants.Conclusion:The Tribunal, by majority order, set aside the impugned orders and allowed the appeals with consequential relief to the appellants, holding that the show cause notice was time-barred, and the extended period could not be invoked. The penalties on the authorized signatory, director, and the company were also set aside.