TaxTMI 
TaxTMI 
2024 (1) TMI 960
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....ained to set up a captive power plant. The power generated was proposed for use in the manufacture of Pig Iron/Ferro Alloy, as per the project report. The power plant was installed and the power generated was supplied to the grid as the manufacturing plant for Ferro Alloys was not set up. The capital goods were brought into the factory and on such capital goods CENVAT credit was availed by the appellant. The appellant's plant to commence production of Ferro Alloys got delayed and never got installed until the show-cause notice was issued. 3. The case of the department, in nut shell, was that since the capital goods on which the CENVAT credit was availed were used to manufacture only exempted goods (electricity), therefore, the CENVAT credit was inadmissible in terms of Rule 6(4) of the CENVAT Credit Rules, 2004. The order dated 15-9-2017, which is subject matter of this appeal, upholds the view taken by the Central Excise Department holding that until commencement of the proceedings, manufacturing facility for dutiable goods was not set up, therefore, the credit was inadmissible in terms of Rule 6(4) and is liable to be recovered under Rule 14 read with Section 11A of the Centra....
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....i) Learned counsel would submit that the earlier proceeding of show cause notice dated 30-11-2010 were initiated after examination of statutory returns and statutory records of the appellant. He would submit that the availment of CENVAT credit and no manufacture of dutiable goods have been declared every month by the appellant in its ER-1 return which stood filed online as well as physically. He would submit that despite admitted events on record, the department consciously avoided to issue any notice and fall back to the audit proceeding concluded on 12-3- 2012, therefore, the fact of active fraud or suppression with an intent to evade tax does not exist. He would submit that based on such facts, deliberately the department proceeded to apply extended period of limitation of five years and issued the show cause notice on 7-8-2013 whereby the CENVAT credit availed for the period prior to July, 2008 was denied. (iv) Learned counsel would submit that dutiable manufacturing capacity was delayed due to financial instability and market condition and could not be set up till 2017. Subsequently, the wire drawing unit was set up and power generated was used for wire drawing unit and exc....
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....regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit, therefore, the burden of proof is on the appellant to prove that he is entitled to take CENVAT credit. Learned counsel would submit that when the enquiry about the wrong availment of credit was started, the Rule 14 as existed used the word 'taken or utilized', which was subsequently amended with the word 'and' as such the benefit of subsequent amendment cannot be given to the appellant. He would submit that the amendment cannot be applied retrospectively. (b) With respect to limitation, learned counsel would submit that till 2012 the appellant did not disclose that they are selling electricity to outside and only in the year 2012 when enquiry was initiated they get aware about the said fact. He placed his reliance to the decision rendered by the Supreme Court in the matter of Maruti Suzuki Limited Versus Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 to submit that the moment electricity sold outside instead of captive use that would be leviable. With respect to Section 11A of the Central Excise Act, learned counsel would refer to explana....
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.... as per Section 11A and 11AB of the Excise Act or Section 73 and 75 of the Finance Act. This necessarily lead us to refer Section 11A of the Excise Act, and relevant portion of the said provision is quoted below : 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-- (1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,-- (a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,-- (i) his own ascertainment of su....
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.... we went through the facts of this case. The appellant availed the credit between October, 2005 to July, 2008. Out of that an amount of Rs. 1,74,33,695/- was availed prior of 1-7-2008 and Rs. 4,59,51,412/- was availed in July, 2008. Thus, the total credit disputed amount is Rs. 5,13,70,707/-. Section 11A postulates the issue of show cause notice from the relevant date. Undisputedly, the return was filed in every month and the CENVAT credit, which was availed by the appellant, was also shown in the return, which is not in dispute. The 'relevant date' has been has been defined in explanation 1(b)(i), (ii) and (iii) of Section 11A of the Central Excise Act, which is quoted below : (b) "relevant date" means,-- (i) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid, and no periodical return as required by the provisions of this Act has been filed, the last date on which such return is required to be filed under this Act and the rules made thereunder; (ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid and the return ....
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....4,69,378/- 2,49,204/- - 2.1) Noticee failed to produce the details of receipt, disposal and consumption of the aforesaid structural steel items as required under Rule 9 of Cenvat Credit Rules, 2004. Noticee have also not mentioned/shown manufacture of any goods using the aforesaid steel items in their periodical returns filed with the department. As the onus is upon the manufacturer availing cenvat credit to fulfill the aforesaid condition, which they have failed to discharge, the aforesaid cenvat credit taken by them appears to be irregular and liable to be disallowed and recovered. 16. Perusal of the aforesaid contents of the show cause notice, no imagination can be drawn that the respondent was not aware of the fact that the CENVAT credit has been availed by the appellant. 17. The Supreme Court in the matter of P&B Pharmaceuticals (P) Ltd. v Collector of Central Excise (2003) 3 SCC 599 : 2003 SCC OnLine SC 253 : 2003 (153) ELT 14 (SC) has held thus at para 12 : 12) We have indicated above the facts which make it clear that the question whether M/s. Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excis....
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.... xxx 18. Furthermore, extension of the period of limitation entails both civil and criminal consequences and, therefore, must be specifically stated in the show cause notice, in absence whereof the Court would be entitled to raise an inference that the case was not one where the extended period of limitation could be invoked. [See CCE v M/s. Punjab Laminates Pvt. Ltd.] 19. It is well settled proposition that Section 11A(4) is an exception to the general rule and it should be invoked in exceptional circumstances not in a routine manner and specially when the assessee has disclosed everything which is required to disclose under the statute then it cannot be tainted with fraud of suppression of fact. The monthly return which was filed shows the indisputable fact that the appellant has disclosed about availment of CENVAT credit. 20. It is the case of the appellant that he availed CENVAT credit based upon the bona fide belief on the basis of multiple judgment wherein the intent to set up both power plant of manufacture of electricity and plant for manufacture of taxable goods and even if power plant commences production before dutiable capacity the credit on power plant i....
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.... belief based upon certain judgment then in such case the said bona fide belief cannot be stated to be a suppression of fact and Court held thus at paras 8, 14 & 23 : 8) On the issue of time bar, the CESTAT has held that during the relevant period the Appellant could have entertained a bonafide belief that it had correctly discharged its duty liability in view of the view taken by the Tribunal in the case of IFGL Refractories Ltd. which came to be reversed by this Court only on 9.8.2005. It is relevant to note here that insofar as the decision on time bar is concerned the view of the two learned members who constituted the division bench of CESTAT was unanimous. xxx xxx xxx 14) In the case of Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay2, this Court, while dealing with a similar fact circumstance wherein the extended period of limitation under the abovementioned proviso had been invoked, held that since the expression "suppression of facts" is used in the company of terms such as fraud, collusion and willful misstatement, it cannot therefore refer to an act of mere omission, and must be interpreted as referring to a deliberate a....
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....to apply the provisions of Section 11A(4) and Section 11AC for penalty, the intention to evade payment of duty cannot be interfered. The declaration to the department that facility was being set up for generation of electricity and Pig Iron/ Ferro Alloys was given by the appellant and the same declaration was given to the State VAT Department and Department of Industries, therefore, the department was aware of the fact that credit has been availed and no dutiable goods are manufactured through monthly statutory returns, which categorically stated the amount of credit availed and being carried and details of manufacture of goods. Perusal of the record would show that various returns have been filed, which are on record. Therefore, the relevant data was in the knowledge of the department as such suppression on the face of it cannot be alleged. To allege suppression, positive action having mens rea required to be established on the part of the appellant and even mere omission to give correct information cannot lead to conclusion of suppression unless it was deliberate to stop payment of duty. This proposition has been laid down in the matter of Continental Foundation Jt. Venture v Com....
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....;wilful', preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words 'contravention of any of the provisions of this Act or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement of fact must be wilful. 26. Another aspect of consideration is whether the shows cause notice dated 7-8-2013 is barred by limitation of five years also. The submission of the respondent that 'relevant date' would be reckoned as per clause (i) (ii) of explanation of 1 of Section 11A does not appear to be applicable for the reason that those explanation deal with the cases where dispute is regarding excisable goods and duty thereon. According to us, the relevant provision to determine the relevant date is explanation 1(b)(iii) to Section 11A. The relevant date in cases not concerning duty on excisable goods shall be date on which duty of excise is required to be paid under the Act or Rules thereund....
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....be payable even if the Cenvat credit is wrongly taken but the same is not utilized. The judgment of this Court in the case of Commissioner, Central Excise and Customs v M/s Vandana Vidyut Ltd. TAXC No.24 of 2014, is based on the principle laid down in Ind-Swift Laboratories Ltd. (supra) and erstwhile provision of the Cenvat Credit Rules. 30. However, there has been a change/amendment of provision. After the judgment of the Supreme Court in Ind-Swift Laboratories Ltd. (supra) the Government has incorporated new amendment in the Rule 14 of the credit rules 2004. The said amendment in Rule 14 of the Credit Rules was brought in the year 2012 vide Notification No. 18/2012-CE(NT) dated March 17, 2012 (Effective from April 1, 2012). 31. The relevant extract of Rule 14 of the Credit Rules (after amendment on 17th March 2012) effective since 1st April, 2012 is reproduced hereunder: "RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.-- Where the CENVAT credit has been taken and utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions o....