2019 (7) TMI 1297 - AT - Central Excise

Appellant's CENVAT Credit dispute: Extended limitation period challenged

The appellant was accused of wrongfully availing CENVAT Credit on certain goods, leading to allegations of non-compliance with CENVAT Credit Rules. The ... CENVAT Credit - input which was not used by it in the manufacture of any dutiable products - Rule 6 (1) of the CENVAT Credit Rules, 2004 - fact of wrongly availing CENVAT Credit came to light only during verification/audit in October 2015 - suppression of facts or not - extended period of limitation - penalty - HELD THAT:- The undisputed fact therefore remains that the allegation of wrong availment was detected only from the Books/records of the assessee; there is no whisper about finding the alleged irregularity not in the context of the Books/records of the assessee but otherwise and there is also no whisper about any independent enquiry yielding any result. Further also it is not the case of the Revenue nor is there any finding that there was an act of suppression by which the appellant intended to evade the tax/duty or successfully evaded the payment of duty. Albeit Show Cause Notice alleges contravention of Rule 6 (1), there is nothing beyond this; no whisper about suppression, fraud, etc., much less even intention to evade payment of duty, in the Show Cause Notice. In the case on hand, there is no dispute about the fact that the ER-1 return disclosed the availment of CENVAT Credit and even though it is filed under self-assessment system, the Officers are supposed to scrutinize the same. Just because the assessee had taken CENVAT Credit in respect of certain input services which according to the Revenue was not admissible, it cannot be concluded that such credit had been taken knowing very well that the same was inadmissible unless some evidence is brought on record. Penalties - HELD THAT:- The appellant, upon being pointed out, did reverse the above credit and duly reflected the same in their ER-1 return filed for the month of January 2016 - Section 11AC of the Central Excise Act, 1944 provides that where any duty of excise has not been levied or paid or has been short-levied or short-paid, etc., by reason of fraud, collusion, etc., with an intent to evade payment of duty, such person is liable to pay a penalty equal to the duty determined - As per the provision of Rule 15 (2) of the CENVAT Credit Rules, 2004, in a case where the CENVAT Credit has been taken and utilized wrongly by reason of fraud, suppression, etc., and in contravention of any of the provisions of the Central Excise Act or of the rules made thereunder with an intent to evade payment of duty, the manufacturer shall also be liable to pay penalty in terms of the provisions of Section 11AC of the Central Excise Act. Extended Period of Limitation - HELD THAT:- In the case on hand, the SCN issued without the specific allegation of suppression, fraud, etc., invoking the larger period of limitation cannot therefore sustain - The impugned order for the period from December 2012 to October 2014 cannot sustain and therefore, the same is set aside. Appeal allowed - decided in favor of appellant. Issues:1. Allegation of wrongful availment of CENVAT Credit on Aluminium Sheets and MS Chequered Sheets.2. Justification for invoking the larger period of limitation.3. Allegation of suppression and intent to evade payment of duty.4. Compliance with Rule 6(1) of the CENVAT Credit Rules, 2004.5. Reversal of credit by the appellant and penalty imposition.6. Interpretation of Section 11AC of the Central Excise Act, 1944.7. Scrutiny of ER-1 returns and self-assessment system.8. Application of the principle of suppression in tax evasion cases.Detailed Analysis:1. The appellant was accused of wrongly availing CENVAT Credit on certain goods. The Show Cause Notice alleged contravention of Rule 6(1) of the CENVAT Credit Rules, 2004. The irregularity was detected during an audit, and the Revenue contended that the appellant had availed credit on inputs not used in the manufacture of dutiable products.2. The Revenue sought to justify invoking the extended period of limitation based on the alleged intent of the appellant to evade payment of duty. However, the appellant argued that the Show Cause Notice did not specifically address suppression or fraud to warrant the extended limitation period.3. The issue of suppression and intent to evade payment of duty was crucial. The appellant contended that there was no evidence of mala fides since they voluntarily corrected the alleged irregularity upon audit findings. The absence of specific allegations in the Show Cause Notice regarding suppression weakened the Revenue's case for invoking the extended limitation period.4. Compliance with Rule 6(1) of the CENVAT Credit Rules, 2004 was questioned. The Revenue argued that the appellant disregarded the provisions of Rule 9(6) of the said rules, while the appellant maintained that the ER-1 returns disclosed all relevant details, negating the allegations of inadmissible credit.5. The appellant reversed the disputed credit and reflected the correction in their ER-1 return. The penalty imposition was discussed concerning the provisions of Section 11AC of the Central Excise Act, 1944, which mandates penalties for wrongful credit utilization due to fraud or suppression.6. The judgment delved into the interpretation of Section 11AC and emphasized the importance of proving suppression of facts by the Revenue when invoking the extended limitation period. The appellant's actions in rectifying the credit discrepancy were considered in light of the legal provisions.7. Scrutiny of ER-1 returns and the self-assessment system was highlighted. The Court noted that the mere availing of credit on disputed inputs did not automatically imply fraudulent intent unless proven otherwise with concrete evidence.8. The application of the principle of suppression in tax evasion cases was crucial. Citing legal precedents, the judgment emphasized that deliberate intent to evade duty must be proven for the extended limitation period to be justified. The absence of specific allegations of suppression in the Show Cause Notice led to the decision to set aside the order for the disputed period.This detailed analysis covers the various legal aspects and arguments presented in the judgment, providing a comprehensive understanding of the case and its outcomes.