2012 (12) TMI 979 - HC - Central Excise

Cenvat Credit - reasonable steps before availing credit - original manufacturer of fabrics were alleged to be fictitious - endorsed invoices - period of limitation - Held that - Tax appeal is disposed on the same lines of the decision of this Court in case of Prayagraj Dying & Printing Mills Pvt. Ltd. & Ors. Vs. Union of India & ors (2013 (5) TMI 705 - GUJARAT HIGH COURT). - Decided in favour of assessee.

Summary

Issues:
The judgment involves the application of the principle of limitation in a tax appeal, specifically whether the demand of reversal is barred by the period of limitation and if the larger period of limitation can be extended in the absence of evidence of fraud by the appellants. The judgment also addresses the interpretation of various legal precedents related to fraud, limitation, and the genuineness of documents in tax matters.

Analysis:
The judgment in this case revolves around the issue of limitation in a tax appeal, where the Court considered whether the demand of reversal is barred by the period of limitation. The Court referred to a previous decision by a Division Bench in the case of Prayagraj Dying & Printing Mills Pvt. Ltd. & Ors., where it was held that the larger period of limitation cannot be applied if the transferees were not party to any fraud. The Court cited several Supreme Court decisions to support this view, emphasizing that the larger period of limitation under Section 11A(1) of the Act is applicable only in cases of positive evasion of duty, not mere failure to pay duty. The judgment also highlighted the importance of the holder in due course principle when dealing with documents issued by a party engaged in fraud.

In analyzing the decisions cited by the Revenue, the Court differentiated various cases where fraud or forgery was alleged, emphasizing that in the present case, the documents were found to be genuine, and the appellants were not implicated in any fraudulent activity. The Court also discussed the relevance of the principles laid down in different judgments concerning fraud, limitation, and the genuineness of documents in tax matters. The Court concluded that the Tribunal's decision to remand the matter was erroneous as the claim was time-barred due to the absence of fraud allegations against the appellants.

Ultimately, the Court held that the tax appeal should be disposed of in line with the decision in the Prayagraj Dying & Printing Mills case, reversing the Tribunal's judgment. The Court found that there was no basis for reopening the transactions after the period of limitation, given the genuine nature of the documents and the lack of evidence implicating the appellants in any fraudulent activity. The judgment reaffirmed the importance of upholding the principles of limitation and due process in tax appeals to ensure fairness and legal compliance.