2016 (11) TMI 265 - AT - Central Excise

Manufacturer's Appeal on Cenvat Credit Duty Demand Upheld

The Tribunal allowed the appeal, ruling that the extended period of limitation was not applicable in the case of a manufacturer appealing against a duty ... Extended period of limitation - Cenvat credit on capital goods - show cause notice - mala fide suppression - payment of interest and disclosure - consequential benefitsExtended period of limitation - Cenvat credit on capital goods - mala fide suppression - payment of interest and disclosure - show cause notice - Validity of invoking the extended period of limitation in the show cause notice for taking 100% Cenvat credit on moulds and dies during October 2003 to May 2004 - HELD THAT: - The appellant had taken 100% Cenvat credit on moulds and dies in reliance upon a CBEC Circular dated 22/9/2003; subsequently that Circular was modified but there is no finding that the appellant acted despite knowledge of the modification. The transactions were recorded in the books maintained in the ordinary course of business and the appellant calculated and paid interest on the excess credit and intimated the Revenue prior to issuance of the show cause notice. There is therefore no material establishing wilful suppression or mala fide conduct by the appellant. In these circumstances the extended period of limitation, which requires concealment or fraud, is not invokable. As a consequence the show cause notice and the consequential original and appellate orders founded on the extended period were set aside.Extended period of limitation not invokable; show cause notice was bad and Orders-in-Original and-in-Appeal are set aside; appellant entitled to consequential benefits in accordance with law.Final Conclusion: Appeal allowed: invocation of extended limitation period quashed; original and appellate orders set aside and appellant granted consequential reliefs as per law. Issues:1. Whether the extended period of limitation was rightly invoked in the show cause notice.Analysis:The appellant, a manufacturer of plastic parts, appealed against the Order-in-Appeal passed by the Commissioner (Appeals) Customs and Central Excise. The main issue was whether the extended period of limitation was correctly invoked in the show cause notice. The appellant had availed 100% Cenvat credit on moulds and dies based on a Circular dated 22/9/2003, which was later modified by another Circular on 13/10/2003 to allow 50% credit in the first year and the balance in the subsequent year. The Revenue objected to the appellant's 100% credit claim during a revenue audit and issued a show cause notice proposing a demand. The Commissioner Appeals modified the demand, sustaining the levy for taking 50% balance credit in the first year and confirmed the duty demand for the excess amount taken along with interest. The penalty was reduced. The appellant contended that there was no fraud or suppression as the credit was taken based on the initial Circular, and they had paid the interest on the excess credit before the show cause notice was issued. The Tribunal held that there was no mala fide conduct on the part of the appellant and set aside the Order-in-Appeal and Order-in-Original, stating that the extended period of limitation was not applicable in this case.In conclusion, the Tribunal allowed the appeal, stating that the appellant was entitled to consequential benefits in accordance with the law. The judgment emphasized that there was no fraudulent intent or suppression by the appellant in availing the Cenvat credit, as it was based on the Circular in force at that time. The Tribunal ruled that the extended period of limitation was not applicable in this scenario, as the appellant had paid the interest on the excess credit before the show cause notice was issued, demonstrating good faith and compliance with the law.