CESTAT upholds CENVAT credit demands for exempted goods but orders recalculation of Rs.97 lakh penalty amount

CESTAT New Delhi partially allowed the appeal and remanded the matter to the original authority. The tribunal upheld demands for CENVAT credit wrongly availed on common input services for exempted goods and trading activities, confirming extended limitation period due to suppression of facts. Penalty under Section 11AC and interest on delayed payment were sustained. However, the computation of Rs.97,01,260/- demand requires recalculation considering already reversed CENVAT credit, and verification of departmental figures needs reconsideration at original stage.

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Issues Involved:
1. Computation of demand of CENVAT Credit on common input services used for exempted goods (electricity).
2. Demand of CENVAT Credit on common input services used for exempted services (trading of goods).
3. Invocation of extended period of limitation.

Summary:

Issue 1: Computation of demand of CENVAT Credit on common input services used for exempted goods (electricity):

The tribunal noted that the appellant exercised the option to pay an amount in lieu of CENVAT Credit u/s 6(3A) of the CENVAT Credit Rules due to the use of common inputs for dutiable and exempted goods. The appellant argued that the computation by the department included the value of electricity cleared by other units, not just the Siltara unit. The tribunal observed that the appellant failed to provide a Chartered Accountant's certificate to prove the figures were consolidated. The tribunal remanded the issue to the original authority to verify the figures and allow the appellant to submit necessary documentation.

Issue 2: Demand of CENVAT Credit on common input services used for exempted services (trading of goods):

The tribunal examined whether the clearances of goods by the appellant amounted to trading or were clearances of inputs as such. The tribunal concluded that the clearances earned substantial profit and used common input services, thus amounting to trading of goods, an exempted service. The tribunal upheld the demand but directed the original authority to recalculate the differential duty, considering the CENVAT credit already reversed by the appellant.

Issue 3: Invocation of extended period of limitation:

The tribunal upheld the invocation of the extended period of limitation, noting that the appellant suppressed critical information and misdeclared facts to evade payment. The tribunal referenced several judicial precedents to support this conclusion. The tribunal also upheld the imposition of penalties and interest, directing the original authority to re-quantify the demand and penalties proportionately based on the revised calculations.

Conclusion:

The tribunal partially upheld the impugned order, remanding the issues for re-quantification and verification of figures, and upheld the invocation of the extended period of limitation, penalties, and interest.

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