2024 (7) TMI 616 - AT - Central Excise

Manufacturer cannot withdraw CENVAT credit option to claim N/N. 8/2003-CE exemption during same financial year

CESTAT Bangalore held that appellant could not claim exemption benefit under N/N. 8/2003-CE for May 2006 to March 2007 after opting to pay duty with ... Benefit of N/N. 8/2003-CE dated 01.03.2003 denied - appellant opted for availing cenvat credit on inputs and cleared the final products on payment of duty for the month of April 2006 - time limitation - suppression of facts or not - HELD THAT:- As per clauses 2(i) and (ii) of the above Notification, the appellant had an option either to avail exemption of duty or not to avail the exemption Notification; and pay duty on the final products and accordingly, will be eligible for the benefit of CENVAT credit on the inputs used in the manufacture of the final products. Such an option cannot be withdrawn during the remaining part of the financial year. Therefore, having paid duty in the month of April 2006 by availing CENVAT credit, the question of availing the benefit of exemption for the remaining part of the year did not arise. The appellant in order to exhaust the credit available with them paid duty by utilizing the credit for the month of April 2006 and thereafter, having surrendered the licence cannot go back to manufacture and avail the benefit of ‘Nil’ rate of duty for the remaining months of the same financial year. Therefore, the benefit of the Notification No.8/2003-C.E. dated 01.03.2003 cannot be extended to the appellant for the remaining period of the financial year i.e. May 2006 to March 2007. Time Limitation - HELD THAT:- In the instant case, all the material facts were before the authorities before issuance of the first notice but they choose to issue for only one of the paras and the second notice was issued on the same audit note which was available to them at the time of the first notice and therefore as rightly observed by the Hon’ble High Court of the Madras in the case of M/S. ANGLO FRENCH TEXTILES VERSUS THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [2018 (8) TMI 1396 - MADRAS HIGH COURT] and various other decisions relied upon by the appellant, there are no merit in the second show-cause notice invoking suppression in as much as the notice was issued based on the common audit note and all the relevant facts were available before the authorities concerned at the time of issuance of first show-cause notice. Second show-cause notice dated 22.09.2009 issued after the adjudication of the first show-cause notice as claimed by the appellant is clearly time barred and devoid of any merit. The impugned order is set aside - appeal allowed. Issues Involved:1. Availment of CENVAT credit and subsequent exemption under Notification No. 8/2003-CE.2. Limitation and validity of the second show-cause notice.Issue-wise Detailed Analysis:1. Availment of CENVAT Credit and Exemption:The appellant, M/s. Veejay Enterprises, manufactures HDPE/PP woven sacks and had a balance of CENVAT credit at the end of the financial year 2005-2006. They availed CENVAT credit in April 2006 and surrendered their registration certificate on 08.05.2006. During an audit, it was found that the appellant restarted manufacturing and cleared goods without paying duty, which was against the provisions of Notification No. 8/2003-CE dated 01.03.2003. The authorities confirmed the demands for the period from May 2006 to March 2007.The appellant argued that the payment of duty in April 2006 was a mistake and should not deny them the benefit of the exemption. They cited several cases to support their argument. However, the Tribunal noted that according to clauses 2(i) and (ii) of Notification No. 8/2003-CE, once the option to pay duty is exercised, it cannot be withdrawn for the remaining part of the financial year. Hence, having paid duty in April 2006, the appellant could not avail the exemption for the rest of the year. The Tribunal referenced the case of Cybele Herbal Laboratories (P) Ltd. to support this interpretation.2. Limitation and Validity of the Second Show-Cause Notice:The appellant surrendered their registration on 08.05.2006, and an audit was conducted on 20.03.2007. Based on the audit, a show-cause notice was issued on 04.11.2008, which was adjudicated on 19.08.2009. A second show-cause notice was issued on 22.09.2009 based on the same audit note. The appellant argued that the second notice could not invoke suppression or mis-declaration, as the matter had already been addressed in the first notice.The Tribunal agreed, noting that the second show-cause notice was based on the same audit note as the first and that all relevant facts were available to the authorities at the time of the first notice. Citing the case of Anglo-French Textiles, the Tribunal held that issuing a second notice on the same grounds after the first had been adjudicated was impermissible. Therefore, the second show-cause notice was deemed time-barred and without merit.Conclusion:The Tribunal set aside the impugned order, granting consequential relief to the appellant. The appeal was allowed, and the second show-cause notice was declared invalid due to being time-barred and lacking merit.Order Pronounced:(Order pronounced in Open Court on 10.07.2024.)