2022 (5) TMI 389 - AT - Central Excise

Tribunal rules in favor of appellant due to time-barred demand and lack of specific allegations

M/s. Hyundai Motors India Ltd. Versus Commissioner of GST & Central Excise, Chennai

The tribunal ruled in favor of the appellant in a case concerning delay in adjudication of a Show Cause Notice issued in 2011, non-reversal of CENVAT ... Reversal of CENVAT Credit in respect of SAD - Removal of inputs as such or transfer by sale covered under Rule 10 of CENVAT Credit Rules, 2004? - case of appellant is that the reversal took place but they cannot substantiate it as adjudication has taken place after a delay of 10 years from the date of issuance of SCN - Extended period of limitation - HELD THAT:- he Show Cause Notice dated 23.11.2011 has been adjudicated vide order impugned herein dated 21.9.2021. There is a delay of 10 years in adjudicating the matter. It is seen that the appellant had replied to the Show Cause Notice on 31.5.2012. The original authority has dropped demand of Rs.5,63,42,519/- with regard to the slum sales to Mobis India Ltd. Only a demand of Rs.28,17,475/- has been confirmed alleging that the appellant has not reversed the credit in respect of the SAD. When the appellants have given detail reply to the Show Cause Notice and also filed ER-1 returns reflecting the reversal of credit made by them, the confirmation of demand after a period of 10 years alleging that the appellants have not been able to establish the reversal by producing sufficient document is indeed not fair to the appellant. The observation made by the adjudicating authority for confirming the demand is that the appellants have not provided any evidence to show that they have reversed the SAD in respect of the imported materials cleared as such. The Hon'ble High Court of Bombay in the case of PARLE INTERNATIONAL LIMITED VERSUS UNION OF INDIA AND OTHERS [2020 (11) TMI 842 - BOMBAY HIGH COURT] held that the inordinate delay of 13 years in adjudicating the Show Cause Notice is untenable. It has merely stated that the fact of non-payment would not come to notice but for the verification of the audit department. In the absence of any specific allegation and proof that the appellant has suppressed facts, the extended period cannot be invoked. There is no evidence adduced by the department that the appellant has suppressed facts with intent to evade payment of duty. The decisions relied by the learned counsel in the case of KAUR & SINGH VERSUS COLLECTOR OF CENTRAL EXCISE, NEW DELHI [1996 (11) TMI 84 - SUPREME COURT] apply to the facts of this case, where it was held that Which ground is alleged against the assessee must be made known to him, and there is no scope for assuming that the ground is implicit in the issuance of the show cause notice. The appellant succeeds on the ground of limitation. The demand is held to be time-barred - Appeal allowed - decided in favor of appellant. Issues:1. Delay in adjudication of the Show Cause Notice2. Allegation of non-reversal of CENVAT credit of Special Additional Duty (SAD)3. Grounds of limitation in invoking the extended period for recoveryDetailed Analysis:1. Delay in Adjudication:The primary contention raised by the appellant's counsel was regarding the significant delay of 10 years in adjudicating the Show Cause Notice issued in 2011, with the order being passed only in 2021. The appellant had responded to the notice in 2012, providing details and explanations. The delay was argued to be a violation of principles of natural justice, hindering the appellant's ability to substantiate their defense adequately. The counsel cited various judgments, including the Parle International Ltd. case, emphasizing that such prolonged delays in adjudication are untenable and unfair to the appellant.2. Allegation of Non-Reversal of CENVAT Credit:The case revolved around the appellant's alleged failure to reverse the CENVAT credit of SAD on imported raw materials cleared 'as such.' The appellant contended that they had indeed reversed the credit and paid amounts exceeding the credit availed, as per Rule 3(5) of the CENVAT Credit Rules, 2004. The appellant's submissions in their reply to the Show Cause Notice and the details provided in their monthly returns supported their claim of compliance. The absence of any dispute on this aspect in the Show Cause Notice further strengthened the appellant's argument.3. Grounds of Limitation:The appellant also argued on the grounds of limitation, asserting that there was no allegation of willful suppression or misrepresentation of facts in the Show Cause Notice. The notice vaguely mentioned that the non-reversal of CENVAT credit of SAD would not have come to light without audit verification, invoking the extended period for recovery. However, the absence of specific allegations of suppression or intent to evade payment of duty weakened the department's case. Citing legal precedents, including the Kaur & Singh case, the appellant contended that the extended period could not be invoked without clear evidence of suppression of facts.In the final judgment pronounced on 6th May 2022, the tribunal ruled in favor of the appellant, holding that the demand was time-barred due to the lack of specific allegations and evidence of willful suppression. The impugned order was set aside, and the appeal was allowed, granting the appellant consequential reliefs. The tribunal's decision highlighted the importance of adherence to principles of natural justice and the necessity for clear allegations to invoke extended periods for recovery in such cases.