2025 (12) TMI 683 - AT - Central Excise

SCN for Cenvat credit u/rr 3 and 4 held time-barred; extended period u/s11A(4) rejected

CESTAT New Delhi held that the departmental show cause notice demanding recovery of allegedly wrongly availed and utilized Cenvat credit under Rule 3 read ... Availment and utilization of Cenvat credit twice, which is not permissible under Rule 3 read with Rule 4 of the Cenvat Credit Rules, 2004 - area based exemption availed under the N/N. 50/2003-CE dated 10.06.2003 - show cause proceedings initiated by the department are barred by limitation of time or not - HELD THAT:- The appellant vide their letter dated 30.11.2016 addressed to the jurisdictional superintendent had informed regarding availment of the area based exemption and upon completion of the exemption period, they had availed the Cenvat credit and the credit particulars were duly reflected in the monthly ER-1 returns filed by them. Further, subsequent to the said letter dated 30.11.2016, the appellants had also filed another letter on the same date, enclosing therewith the Certificate dated 08.12.2016 issued by Chartered Accountant, certifying that the Cenvat credit was availed in respect of the inputs and capital goods received by the appellants in their factory premises. Furthermore, the appellants in their letter dated 10.12.2016 had once again informed the jurisdictional Range Superintendent regarding availment of the disputed Cenvat credit by them. On reading of the said letters available in the case file, I find that the fact regarding availment of the benefit under the notification dated 10.06.2003 and taking of Cenvat credit on the disputed goods and services were known to the department in November, 2016. Thus, under such circumstances, the department was required to issue the show cause notice within the normal period of two years from the date of taking of such Cenvat credit. Since the provisions of sub-section (4) of Section 11A of the Central Excise Act, 1944 was invoked for recovery of the adjudged demands, it is incumbent on the department to substantiate their stand that there are in fact involvement of the ingredients i.e. fraud, willful misstatement, collision, etc., on part of the appellants. The onus entirely lies with the department to prove that their action is correct in invoking the extended period of limitation, which in the present case, has not been properly substantiated. There are no merits in the impugned order, insofar as, it has upheld confirmation of the adjudged demands on the appellants under the provision of subsection (4) of Section 11A of the Central Excise Act, 1944 - the impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the show cause notice issued for recovery of Cenvat credit, by invoking the extended period under Section 11A(4) of the Central Excise Act, 1944, was barred by limitation in view of prior disclosure of all material facts to the department. 1.2 Consequentially, whether the confirmation of demand, interest and penalty under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(4) and Section 11AC of the Central Excise Act, 1944 could be sustained. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of invocation of extended period of limitation under Section 11A(4) Legal framework 2.1 The demand was raised under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(4) of the Central Excise Act, 1944, alleging irregular availment and utilization of Cenvat credit twice, and invoking the extended period on the basis of suppression/misstatement etc. Interpretation and reasoning 2.2 The Tribunal noted that the appellant had, by letter dated 30.11.2016 addressed to the jurisdictional Superintendent, informed the department about (a) availment of area based exemption under Notification No. 50/2003-CE, (b) expiry of the exemption period, and (c) availment of Cenvat credit thereafter, with the credit particulars duly reflected in the ER-1 returns for November/December 2016. 2.3 On the same date, a further letter was filed enclosing a Chartered Accountant's certificate dated 08.12.2016 certifying that Cenvat credit had been availed in respect of inputs and capital goods received in the factory. 2.4 By another letter dated 10.12.2016, the appellant again informed the jurisdictional Range Superintendent regarding availment of the disputed Cenvat credit. 2.5 On reading these contemporaneous letters, the Tribunal found that the department was aware, in November-December 2016, of the appellant's availment of area based exemption and subsequent taking of Cenvat credit on the disputed inputs, capital goods and services. 2.6 In these circumstances, the Tribunal held that the department was required to issue the show cause notice within the normal period of two years from the date of taking such Cenvat credit, and that issuance of notice on 06.03.2020 was beyond the normal period. 2.7 Since the extended period under Section 11A(4) is an exception, the Tribunal held that the onus was entirely on the department to establish the existence of the requisite ingredients such as fraud, wilful misstatement, collusion, or suppression of facts with intent to evade duty. 2.8 The Tribunal found that the department had not properly substantiated any such ingredients on the part of the appellant, especially in light of the prior disclosures and reflection of credit in statutory returns. 2.9 The Tribunal emphasized that issuance of show cause notice within the normal period is the 'rule' and invocation of the extended period is the 'exception', and the department had failed to justify its recourse to the exception in this case. 2.10 The Tribunal noted that judicial forums, in the decisions relied upon by the appellant, had adequately dealt with limitation in similar contexts, and that the present case was covered by the same principle. Conclusions 2.11 The show cause proceedings initiated under Section 11A(4) were held to be barred by limitation, as the extended period was not validly invocable in the absence of proved fraud, wilful misstatement, collusion, or suppression. 2.12 Consequently, the confirmation of demand of Cenvat credit, interest under Rule 14 of the Cenvat Credit Rules, 2004, and penalty under Section 11AC of the Central Excise Act, 1944, as upheld in the impugned order, could not be sustained. 2.13 The impugned order was set aside and the appeal allowed on the ground of limitation, without entering into detailed adjudication on the substantive merits of the Cenvat credit availment.