2014 (12) TMI 201 - AT - Central Excise

Tribunal rules for appellants in Cenvat credit case, stays recovery pending appeal

The Tribunal ruled in favor of the appellants, finding that the extended period for recovery of Cenvat credit was not applicable due to lack of evidence ... Cenvat credit - suppression of facts - Invocation of extended period of limitation - Held that:- Show Cause Notice admits that the appellants had been regularly filing the ER-1 returns showing all the details. The adjudicating authority has held that the noticee was required to declare certain facts instead of taking a plea that it was not required do so. The adjudicating authority does not quote any provision of law under which they were required to declare the ‘facts’ - The adjudicating authority has equated suppression with non-declaration of something not even required to be declared as per law. The Supreme Court in case of Central Excise Vs. Chemphar Drugs and Liniments, [1989 (2) TMI 116 - SUPREME COURT OF INDIA] has held that extended period is applicable only when something positive other than mere inaction or failure on the part of manufacturer is proved. Similar view was held by Supreme Court in the case of Gopal Zarda Udyog Vs. Commissioner of Central Excise Delhi [2005 (9) TMI 83 - SUPREME COURT OF INDIA]. In the present case the adjudicating authority does not bring out any inaction or failure on the part of the appellants. Prima facie the appellants have a fairly good case atleast for non-invokability of the extended period as a consequence of which the impugned demand would be hit by time bar. The appellants have also contended that the impugned credit is admissible on merit also but without going into a detailed analysis of the appellants contentions on merit at this stage, we find that on the ground of time-bar alone, a goods case is made out for waiver of pre-deposit. Accordingly, we waive the pre-deposit and stay recovery of the adjudicated liabilities during pendency of the appeal - Stay granted. Issues involved:1. Disallowance of Cenvat credit by the adjudicating authority.2. Allegations of suppression of facts by the appellants.3. Invoking the extended period for recovery of Cenvat credit.4. Applicability of penalty for suppression of facts.5. Compliance with ER-1 returns and disclosure of details.Issue 1: Disallowance of Cenvat credit by the adjudicating authority:The appellants filed a stay application and appeal against an Order disallowing Cenvat credit amounting to Rs. 2,14,98,946/- for the period Aug 2007 to May 2009. The dispute arose from the adjudicating authority's decision that certain parts and components procured for a captive power plant were not eligible for Cenvat credit. The authority held that the power plant was immovable property, and hence, the appellants were not entitled to the credit, alleging suppression of facts.Issue 2: Allegations of suppression of facts by the appellants:The appellants contended that the parts and components were indeed used in the factory for the captive power plant, making them eligible for the credit. They argued against the characterization of the boiler and power plant as immovable property, citing legal judgments supporting their position. The appellants claimed that they had procured and supplied the parts to the contractors, disclosing Cenvat credit in their ER-1 returns regularly and denying any suppression of facts.Issue 3: Invoking the extended period for recovery of Cenvat credit:The Show Cause Notice invoked the extended period based on alleged suppression of facts by the appellants. The authority claimed that the appellants deliberately withheld information about availing inadmissible Cenvat credit, justifying the recovery under relevant rules and sections. The appellants argued that they had not suppressed any material facts and had a genuine belief in the admissibility of the credit, as supported by legal provisions and judgments.Issue 4: Applicability of penalty for suppression of facts:The adjudication order imposed a mandatory penalty for suppression of facts, alleging that the appellants failed to disclose crucial information regarding the procurement and usage of goods by the contractors. The authority justified the penalty on the grounds of non-disclosure of facts essential for determining Cenvat credit eligibility, despite the appellants' argument that they had complied with ER-1 returns and disclosed all necessary details.Issue 5: Compliance with ER-1 returns and disclosure of details:The appellants maintained that they had consistently filed ER-1 returns, providing all required information. They disputed the authority's claim that they were obligated to declare additional facts beyond what was disclosed in the returns. The authority's equating of non-declaration with suppression was challenged, citing legal precedents emphasizing the need for positive proof of inaction or failure to invoke the extended period.In conclusion, the Tribunal found merit in the appellants' argument regarding the non-invocability of the extended period, potentially rendering the demand time-barred. While the merits of the Cenvat credit admissibility were not fully analyzed at that stage, the Tribunal waived the pre-deposit and stayed the recovery of liabilities pending the appeal.