2025 (1) TMI 1318 - AT - Central Excise

Revenue fails to prove grounds for extended limitation period in CENVAT credit recovery case

CESTAT Chennai held that Revenue failed to prove grounds for invoking extended period of limitation in a CENVAT credit recovery case. The appellant ... Wrongful availment of CENVAT Credit - input service tax credit document did not contain the name and correct address of the assessee - invocation of extended period of limitation - HELD THAT:- The Original Authority has held that the manner in which the ineligible credit was availed by the appellant clearly pointed to the fact that the recovery of such credit warranted invocation of extended period of limitation. The above logic for invoking the extended period of limitation cannot be accepted, since the law does not provide for any implied or hidden aspects or on assumptions or presumptions; any action proposed to be taken should be specific based on the action or inaction on the part of the assessee. Hence, the manner of availing credit may invite actions which ultimately result in recovery of the same, but however, the same could only be done in the manner known or prescribed under law. The Hon’ble Supreme Court in the case of LARSEN & TOUBRO LTD. VERSUS COMMISSIONER OF C. EX, PUNE’II [2007 (5) TMI 1 - SUPREME COURT] has clearly held that the extended period of limitation entails both civil and criminal consequences and therefore must be specifically stated in the SCN. There is no specific allegation as to suppression or fraud in the SCN. There cannot also be any scope to allege so, since as early as 2012 itself, the department had conducted an audit [CERA] wherein the same query was raised, which has also been replied to by the appellant. Admittedly, nothing is brought out on record to indicate as to what prevented the Revenue from issuing the show cause notice immediately, after noticing the wrong availment etc. during audit. Also, why or what prompted them to wait for three more years to issue the show cause notice, also remains conspicuous. More than these, even when the same was brought to the notice through their reply to the SCN, the same has not been considered at all. Conclusion - The Revenue has not satisfactorily proved the invoking of extended period of limitation while raising the impugned demand and the order that has upheld the above demand cannot sustain, for which reason, the same is set aside on limitation alone. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment is whether the Revenue's action in proposing and demanding the allegedly wrongly availed CENVAT credit by invoking the extended period of limitation is justified. The core legal questions revolve around the eligibility of the appellant to avail input service tax credit, the correctness of the distribution of such credit, and the applicability of the extended period of limitation under the relevant laws.ISSUE-WISE DETAILED ANALYSIS1. Applicability of Extended Period of LimitationRelevant Legal Framework and Precedents: The extended period of limitation under the Service Tax Rules, 1944, and the Central Excise Act, 1994, is contingent upon specific conditions such as suppression of facts, fraud, or willful misstatement by the assessee. The Hon'ble Supreme Court in the case of Larsen & Toubro Limited Vs CCE Pune has established that the extended period of limitation entails both civil and criminal consequences and must be explicitly stated in the Show Cause Notice (SCN).Court's Interpretation and Reasoning: The Tribunal found that the Original Authority's logic for invoking the extended period of limitation was flawed. The Tribunal emphasized that the law does not allow for actions based on assumptions or presumptions. Any action must be specific and based on concrete evidence of the assessee's actions or inactions. The Tribunal noted that the Revenue failed to demonstrate any suppression of facts or intent to evade duty by the appellant.Key Evidence and Findings: The Tribunal highlighted that an audit conducted in 2011 had already raised objections, and the appellant had responded to these objections. Despite this, the SCN was issued three years later, without any new evidence of wrongdoing. The Tribunal noted that the Revenue ignored the appellant's replies and contentions both during the audit and in response to the SCN.Application of Law to Facts: The Tribunal applied the legal principles established by the Supreme Court, finding no basis for invoking the extended period of limitation. The Tribunal concluded that the Revenue's delay in issuing the SCN, despite being aware of the facts since 2011, undermined their justification for the extended period.Treatment of Competing Arguments: The Tribunal considered the appellant's argument that the address error was clerical and that there was no double availment of credit. The Tribunal found that these points were uncontested by the Revenue and that the eligibility of the credit was not in question.Conclusions: The Tribunal concluded that the Revenue failed to justify the invocation of the extended period of limitation, and the demand based on this was unsustainable.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, 'The manner of availing credit may invite actions which ultimately result in recovery of the same, but however, the same could only be done in the manner known or prescribed under law.'Core Principles Established: The judgment reinforces the principle that the extended period of limitation can only be invoked with specific allegations of suppression or fraud, and not based on assumptions or delayed actions by the Revenue. It also underscores the need for timely action by the Revenue when discrepancies are identified during audits.Final Determinations on Each Issue: The Tribunal set aside the demand on the grounds of limitation, allowing the appeal with consequential benefits as per law. The Tribunal found that the Revenue had not satisfactorily proven the conditions necessary to invoke the extended period of limitation.