2024 (3) TMI 1425 - AT - Central Excise

Tribunal Rules in Favor of Appellants; Rejects Extended Limitation Due to Revenue Neutrality and No Intent to Evade Duty

In Appeal Nos. E/103/2011 and E/114/2012, the Tribunal ruled in favor of the appellants, setting aside demands for interest and penalties. The Tribunal ... Application for rectification of mistake - CENVAT Credit - invocation of extended period of limitation - demand of interest and penalty - HELD THAT:- It is correct that whatever duty was paid by Unit-II is entitled as CENVAT Credit by Unit-I of the appellant themselves. In these circumstances, it is a situation of revenue neutrality. Therefore, as held by the Hon’ble Apex Court in M/s. Nirlon Ltd. [2015 (5) TMI 101 - SUPREME COURT], it is held that the extended period of limitation is not invokable. Consequently, the demand of interest and penalty against the appellant are not sustainable. The impugned order qua demanding interest and penalty set aside - appeal disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:1. Whether the extended period of limitation can be invoked in Appeal No. E/103/2011 and Appeal No. E/114/2012.2. Whether the demands for interest and penalties in both appeals are sustainable given the circumstances of revenue neutrality and lack of intent to evade duty.ISSUE-WISE DETAILED ANALYSISIssue 1: Invocation of the Extended Period of LimitationRelevant Legal Framework and Precedents:The extended period of limitation is typically invoked under circumstances where there is a willful misstatement or suppression of facts with an intent to evade duty. The appellant in Appeal No. E/103/2011 cited the Supreme Court's decision in M/s. Nirlon Ltd. v. Commissioner of Central Excise, Mumbai, which held that in cases of revenue neutrality, the extended period of limitation is not applicable. Similarly, in Appeal No. E/114/2012, the appellant relied on a decision from this Tribunal in M/s. Verve Consulting Pvt. Ltd. v. Commissioner of Central Excise and Service Tax, Bhubaneswar-I, to argue against the invocation of the extended period.Court's Interpretation and Reasoning:In Appeal No. E/103/2011, the Tribunal recognized that the duty paid by Unit-II was eligible for CENVAT Credit by Unit-I, creating a situation of revenue neutrality. This aligns with the precedent set in M/s. Nirlon Ltd., where the Supreme Court ruled that revenue neutrality negates the invocation of the extended period of limitation.In Appeal No. E/114/2012, the Tribunal noted that the Commissioner (Appeals) had already determined there was no intent to evade duty despite a violation of Rule 8 of the Valuation Rules, 2000. The absence of mala fide intent on the appellant's part was crucial in deciding that the extended period of limitation could not be invoked.Key Evidence and Findings:For Appeal No. E/103/2011, the evidence showed that the appellant had already paid the duty and was not disputing it. The argument centered around the revenue-neutral situation due to CENVAT Credit eligibility.In Appeal No. E/114/2012, the findings highlighted the Commissioner (Appeals)'s acknowledgment of non-compliance with valuation rules but without any intent to evade duty.Application of Law to Facts:In both appeals, the Tribunal applied the legal principle that the extended period of limitation is not applicable in cases of revenue neutrality or absence of intent to evade duty. The facts of each case supported this application, leading to the conclusion that the extended period was not invocable.Treatment of Competing Arguments:The respondent's arguments supporting the impugned orders were considered but ultimately outweighed by the appellant's reliance on legal precedents and the factual context of each case.Issue 2: Sustainability of Interest and Penalty DemandsConclusions:In both appeals, the Tribunal concluded that since the extended period of limitation was not applicable, the demands for interest and penalties were unsustainable. Consequently, the orders demanding interest and penalties were set aside.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning:The Tribunal stated, 'In these circumstances, it is a situation of revenue neutrality. Therefore, as held by the Hon'ble Apex Court in M/s. Nirlon Ltd. (supra), we hold that the extended period of limitation is not invokable.'Core Principles Established:The judgment reinforces the principle that the extended period of limitation cannot be invoked in cases of revenue neutrality or where there is no intent to evade duty.Final Determinations on Each Issue:For Appeal No. E/103/2011, the Tribunal set aside the demand for interest and penalty, recognizing the revenue-neutral situation.For Appeal No. E/114/2012, the Tribunal similarly set aside the demand for interest and penalty, based on the finding that there was no intent to evade duty.In conclusion, both appeals were disposed of in favor of the appellants, with the Tribunal granting consequential relief as appropriate.