2023 (5) TMI 652 - AT - Central Excise

High Court remands case for fresh consideration due to non-speaking order. Tribunal grants relief to Appellant

The Calcutta High Court remanded the matter back to the Tribunal for fresh consideration, finding the earlier order to be non-speaking. The Commissioner ... Wrong and irregular Cenvat credit - It is alleged that the entire transaction was conducted with M/s. AESPL was on paper only with an ulterior motive of availing wrong and irregular Cenvat credit without accompaniment of any physical material said to be manufactured by the said M/s. AESPL - wilful and deliberate suppression of material fact - time limitation - interest and penalty - HELD THAT:- Majority of the evidences which have been relied upon against the Appellant relates to the activities of M/s. AESPL - answer of Revenue was that large machineries needed to be fabricated in the factory premises with plates, angles, channels etc. but there stood no evidence that such plates, angles, brought to the factory premises for fabrication. There was also no such evidence that those machineries were brought in piecemeal manner and assembled at factory premises. It is found that the sole allegation in the show cause notice was that the capital goods received on which the Appellant had availed cenvat credit were never manufactured by M/s. AESPL and that the entire transactions by the Appellant with M/s. AESPL were on paper only. It is a well settled law that the adjudicating authority cannot go beyond the scope of the show cause notice as has been laid down by the Hon’ble Supreme Court in the case of COMMISSIONER OF CUSTOMS, MUMBAI VERSUS TOYO ENGINEERING INDIA LIMITED [2006 (8) TMI 184 - SUPREME COURT] and in the case of THE COMMISSIONER OF CENTRAL EXCISE, BHUBANESWAR-I VERSUS M/S. CHAMPDANY INDUSTRIES LIMITED [2009 (9) TMI 7 - SUPREME COURT]. In these judgments it has been laid down that the department cannot travel beyond the scope of show cause notice and that the Revenue cannot argue the case which has not been made out in the show cause notice. The whole case of the department that the transactions with M/s. AESPL were fake transactions and the Appellant took credit without receipt of the capital goods or non-receipt of the goods clearly falls down. In the show cause notice it was alleged that the Appellant had utterly failed to verify the antecedents of the supplier manufacturer for the purpose of availing of Cenvat credit. This would mean that the goods were actually received by the Appellant without verifying the antecedents of the supplier-manufacturer. It is well settled law that onus of proof that the Appellant received the capital goods from some other source was squarely on the department which it failed to prove - the present case is on a higher pedestal as the capital goods received from M/s. AESPL were duly installed in the factory of the Appellant and were being used in the manufacture of finished goods. The department has not brought any evidence on record that the Appellant did not receive various capital goods from M/s. AESPL and was not using the same in the manufacture of finished goods - there is no material on record to show that M/s. AESPL did not supply capital goods to the Appellant as alleged in the show cause notice and held in the impugned order. Time Limitation - HELD THAT:- In the present case the period involved is from 20-052003 to 30-06-2008 and the show cause notice was issued on 04-122008. The majority of the duty demand is under the extended period of limitation - in the present case even if the goods were not actually manufactured by M/s. AESPL the fact remained that the same were duly received by the Appellant and M/s. AESPL have duly discharged the central excise duty on the same. In such a case extended period of limitation could not be invoked against the Appellant. Interest and penalty - HELD THAT:- Once the duty demand is not sustainable either on merits or on the issue of limitation, the question of sustaining penalty upon the Appellant or demand of interest from them does not survive. The impugned order cannot be sustained both on merits and on the point of limitation - Appeal allowed. Issues Involved:1. Examination of Merits and Grounds Urged by Parties.2. Confirmation of Duty Demand, Imposition of Penalties, and Extended Period of Limitation.3. Receipt and Installation of Capital Goods.4. Allegations of Non-Manufacture by Supplier and Fake Invoices.5. Verification and Investigation Procedures.6. Legal Precedents and Burden of Proof.7. Invocation of Extended Period of Limitation.Summary:1. Examination of Merits and Grounds Urged by Parties:The Hon'ble Calcutta High Court remanded the matter back to the Tribunal for fresh consideration on merits, observing that the earlier order was a non-speaking order.2. Confirmation of Duty Demand, Imposition of Penalties, and Extended Period of Limitation:The Commissioner of Central Excise confirmed a duty demand of Rs. 3,07,48,020/- and imposed an equal amount of penalty, along with a separate penalty of Rs. 50,000/- under Rule 13(1) of Cenvat Credit Rules, 2002, for the period from May 2003 to June 2008. The show cause notice was issued on 04-12-2008 under the extended period of limitation.3. Receipt and Installation of Capital Goods:The Appellant contended that the plant and machinery were duly received, entered into statutory records, and payments were made through banking channels. The Appellant argued that the goods were installed in their factory, supported by quotations, purchase orders, challans, invoices, ledger accounts, bank statements, and ER-1 returns.4. Allegations of Non-Manufacture by Supplier and Fake Invoices:The Revenue alleged that M/s. AESPL did not have the necessary infrastructure to manufacture the goods and that the transactions were on paper only. The Commissioner concluded that the invoices issued by M/s. AESPL were fictitious and no goods were received against those invoices.5. Verification and Investigation Procedures:The Tribunal noted that the officers of Anti-Evasion Unit did not inspect the installation of the capital goods during their visit to the Appellant's factory on 30-06-2008. The Tribunal found it obligatory for the officers to verify the installation of the capital goods received from M/s. AESPL.6. Legal Precedents and Burden of Proof:The Tribunal relied on several judgments, including those of the Hon'ble Supreme Court and High Courts, which held that the burden of proof lies on the person making the allegation. It was established that the Appellant had received the capital goods, and the onus was on the department to prove otherwise.7. Invocation of Extended Period of Limitation:The Tribunal held that the extended period of limitation could not be invoked as the department had knowledge of the alleged non-manufacture by M/s. AESPL as early as 02-03-2006. The demand was thus barred by time.Conclusion:The Tribunal set aside the impugned order on both merits and limitation grounds, allowing the appeal with consequential relief in accordance with law. The Tribunal emphasized that the department failed to prove that the Appellant did not receive the capital goods from M/s. AESPL and that the transactions were genuine.(Order pronounced in the open court on 15 May 2023.)