AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1441
X X X X Extracts X X X X
X X X X Extracts X X X X
....materials to sales of goods to the ultimate customers through the channel partners of the appellant took place. The appellant undertook expansion of the existing facilities at the Regional Distribution Centre and received various input services as well as other services and availed CENVAT credit of taxes paid on such services in terms of the provisions of the CENVAT Credit Rules 2004 [2004 Credit Rules]. The appellant claimed that it had been regularly filing the ER-1 returns in which the availment of such credits was stated in the returns. 3. However, during the audit of the records of the appellant, it was noticed that the appellant had availed inadmissible CENVAT credit on various services used in relation to 'setting up' of a unit. 4. Accordingly, a show cause notice dated 20.03.2020 was issued to the appellant proposing to demand and recover inadmissible CENVAT credit amounting to Rs. 82,55,265/- along with interest and penalty for the period from April 2015 to June 2017 by invoking the extended period of limitation contemplated under section 11A(4) of the Central Excise Act. The appellant filed a reply to the show cause notice and not only contended that it had correctl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if this issue is decided in favour of the appellant it may not be necessary to examine the issues raised on merits. 11. To appreciate the contention that has been advanced by the learned counsel for the appellant in respect of the extended period of limitation, it would be necessary to first reproduce the relevant portion of the show cause notice that invokes the extended period of limitation. Paragraph 7 of the show cause notice is reproduced below: "7. From the foregoing, It appears that the assessee deliberately and intentionally availed and utilised inadmissible CENVAT Credit amounting to Rs. 82,35,265 on various ineligible Input Services during the audit period, in contravention of Rule 2(I) and Rule 3 of CCR. 2004 with intent to evade payment of Central Excise Duty. Had the auditors not detected the wrong availment of CENVAT Credit through detailed scrutiny of their records, the same would have remained undetected. Therefore, the extended period of limitation as contained under Rule 14(1)(ii) of the Cenvat Credit Rules, 2004 read with Section 11A(4)of the Central Excise Act, 1944 appears invokable for recovery of the Cenvat Credit so wrongly availed and utilised b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the appellant to comply with the provisions of Central Excise Law. Further, the appellant has failed to produce any evidence which proves that they intimated the department about the anomaly. I find that there is no such provision or law which debars the department from issuing show cause notice(s) by invoking extended period where the assessee did not disclose the correct information to the department. No law would encourage any assessee to adopt such measures to avoid show cause notice by showing disregard to the legal provisions. Therefore, I find that the appellant has violated the provisions of the CENVAT Credit Rules, 2004 and the department is very much correct in applying clause of extended period for recovery of government dues. And, also the appellant cannot escape from penal action under Rule 15 of the CENVAT Credit Rules, 2004. In this regard, my views find support from the following decisions." (emphasis supplied) 14. The period involved in this appeal is from April 2015 to June 2017. As the show cause notice was issued on 23.01.2020, the entire period is covered by the extended period of limitation. 15. Sections 11A(1) and 11A (4) of the Central Excise Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w cause why he should not pay the amount specify in the notice. Sub-section (4) of section 11A, however, provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason for fraud; or collusion; or any wilful mis-statement; or suppression facts; or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of duty, the Central Excise Officer shall, within five years from the relevant date service notice on such person requiring into show cause why he should not pay the amount specified in notice with interest and penalty. 17. It is clear that to invoke the extended period of limitation, there has to be, amongst others, suppression of facts. Even assuming that there is suppression, it is necessary that such suppression is wilful and with an intent to evade payment of central excise duty. This is what the Supreme Court and the Delhi High Court have held. 18. In Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [1995 (78) E.L.T. 401 (SC)] the Supreme Court examined whether the department was justified in initiating proceedings for short lev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t appeared to the department that the appellant had deliberately and intentionally availed and utilised inadmissible CENVAT credit on various ineligible input services with intent to evade payment of central excise duty and had the auditors not detected the wrong availment of CENVAT credit 'through detailed scrutiny of the records, the same would have remained undetected'. It is for this reason that the extended period of limitation has been invoked. 21. What transpires from a perusal of the show cause notice is that there is no allegation that the appellant has suppressed any information in the ER-1 returns. The only allegation is that the appellant deliberately and intentionally availed and utilised inadmissible CENVAT credit. 22. In the reply to the show cause notice, the appellant categorically referred to the 12 ER-1 returns filed from July 2016 to June 2017 and also mentioned the page numbers showing the availment of credit. 23. It cannot, therefore, be said that the appellant had suppressed any information from the department in the ER-1 returns and it appears that it is for this reason that the show cause notice also does not allege that the appellant had suppresse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ust be established and their existence cannot be presumed simply because the assessee is operating under self-assessment. 17. The argument that the appellant had not disclosed in its returns that it was availing and using ineligible CENVAT credit also deserves to be rejected. The appellant cannot be faulted for not disclosing anything which it is not required to disclose. Form ST-3 in which the appellant is required to file the returns does not require details of the invoices or inputs or input services on which it availed CENVAT credit and the appellant is not required to and hence did not provide the details of the CENVAT Credit taken. It also needs to be pointed out that the Returns are filed online and therefore, it is also not possible to provide any details which are not part of the returns. If the format of ST-3 Returns is deficient in design and does not seek the details which the assessing officers may require to scrutinise them, the appellant cannot be faulted because as an assessee, the appellant neither makes the Rules nor designs the format of the Returns. So long as the assessee files the returns in the formats honestly as per its self assessment, its obligat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1994, the officer has been given wide powers to call for information and has been entrusted the responsibility of making the correct assessment as per his best judgment. If the officer fails to scrutinise the returns and make the best judgment assessment and some tax escapes assessment which is discovered after the normal period of limitation is over, the responsibility for such loss of Revenue rests squarely on the shoulders of the officer. It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under section 72. 21. This legal position that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs7 in its Manual for Scrutiny of Service Tax Returns the relevant portion of which is as follows: 1.2.1A The importance of scrutiny of returns was also highlighted by Dr. Kelkar in his report on Indirect Taxation8. The observation made in the context of Central Excise b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, 2004 and the department is very much correct in applying clause of extended period for recovery of government dues. And, also the appellant cannot escape from the provisions of equal penalty under Rule 15 of the CENVAT Credit Rules, 2004 as the case may be. 23. It is not in dispute that the appellant has been regularly filing the central excise returns and its record had also been audited by the department from time to time. The appellant believed that it could legally reverse the credit in Form GSTR-3B returns. The appellant could not foresee what view the audit team may ultimately take in the future. Thus, when two or more views were possible on a particular issue then merely because the appellant took one view would not mean that the appellant had suppressed any facts from the department with an intention to evade payment of duty. It was for the department to not only allege that the appellant had suppressed material facts from the department to evade payment of duty, but also prove it. A mere statement in the show cause notice that the appellant suppressed material facts with an intent to evade payment of duty does not suffice. This apart, merely because facts came ....