2018 (11) TMI 294 - AT - Central Excise

CESTAT ALLAHABAD: Tribunal rules in favor of appellant in Cenvat credit case

The Appellate Tribunal CESTAT ALLAHABAD allowed the appeal, setting aside the order that imposed a demand and penalty on the appellant for the reversal of ... Extended period of limitation - reversal of Cenvat credit of duty availed in respect of inputs which was subsequently written off in the assessee’s booking account, on account of fact that the same has become obsolete - Held that:- The fact that the appellant’s factory went through an audit, raising an objection of the said fact of written off inputs, as also by appreciating the fact that the appellant is a public sector undertaking and there can be no intent to evade duty, we find favour with the appellant’s submission on the point of limitation. Tribunal in the case of Commissioner of Central Excise, Allahabad Vs Bharat Yantra Nigam Ltd. [2014 (7) TMI 370 - CESTAT NEW DELHI] has observed that unless there is sufficient evidence against a public sector undertaking to establish beyond doubt that a particular activity was being done with an intent to evade duty, the malafide intention cannot be attributed to such public sector undertaking. Appeal allowed on the point of limitation. Issues:Reversal of Cenvat credit of duty availed for obsolete inputs, imposition of penalty, invocation of longer period of limitation, applicability of Rule 3(5B) of Cenvat Credit Rules, public sector undertaking's intention to evade duty.Analysis:1. Reversal of Cenvat Credit for Obsolete Inputs:The disputed issue in the appeal pertains to the reversal of Cenvat credit of duty availed for inputs that were subsequently written off in the assessee's booking account due to obsolescence. The appellant argued that even though earlier decisions did not require such reversal before May 11, 2007, an amendment in Rule 3(5B) of Cenvat Credit Rules made it mandatory to reverse the credit for written-off inputs. The lower authorities confirmed a demand of approximately Rs. 49.61 lakhs along with a penalty, leading to the appeal.2. Invocation of Longer Period of Limitation:The appellant contested the imposition of the longer period of limitation, citing that an audit in 2007 had already highlighted the issue of non-reversal of credit for written-off inputs. The appellant, being a public sector undertaking, argued that there was no malicious intent to evade payment. Citing precedent decisions, the appellant emphasized that unless there is concrete evidence of intent to evade duty, the longer period of limitation should not be invoked.3. Applicability of Precedent Decisions:The Tribunal considered the appellant's submissions, noting that the demand was confirmed by invoking the longer period of limitation. Referring to cases involving public sector undertakings, the Tribunal highlighted that malafide intention cannot be attributed to such entities without sufficient evidence. Relying on judgments like Commissioner of Central Excise, Allahabad Vs Bharat Yantra Nigam Ltd., the Tribunal concluded that in the absence of clear evidence of intent to evade duty, the longer period of limitation should not apply to public sector undertakings.4. Judgment and Conclusion:After evaluating the arguments and precedent decisions, the Tribunal set aside the impugned order and allowed the appeal solely on the grounds of limitation. The Tribunal's decision was based on the lack of evidence establishing any malafide intention on the part of the public sector undertaking, thereby emphasizing the importance of concrete proof before invoking the longer period of limitation.This comprehensive analysis highlights the key legal aspects and reasoning behind the judgment delivered by the Appellate Tribunal CESTAT ALLAHABAD, providing a detailed understanding of the issues involved and the Tribunal's decision-making process.