2015 (5) TMI 994 - AT - Central Excise

Levy of interest on reversal of cenvat credit - Period of limitation - irregular credit on capital goods has been taken which was subsequently reversed - Held that - SCN has been issued beyond the period of one year from the relevant date, inasmuch as, the period involved in the present case is from July 2008 to February 2010 and SCN has been issued on 16.08.2011 - though SCN has been issued beyond the period of one year, but the proviso to section 11A of the Act which deals with issuance of the SCN upto a period of 5 years has not been invoked in the said notice specifically alleging involvement of suppression of fact, willful misstatement etc. The fact is not under dispute that the appellants have reflected the credit particulars in their periodic ER-1 returns duly filed before the Jurisdictional Central Excise Officers. Hence, the fact of taking of credit on the disputed goods and suo motto reversal thereof was known to the Department well in advance before detection of the mistake by the Audit Wing. The reliance placed by the Ld. DR on the judgment of Hon ble Supreme Court in the case of Ind Swift Laboratories 2011 (2) TMI 6 - Supreme Court has no application to the facts and circumstances of the present case because, the issue involved in the said decided case is with regard to interpretation of the word or / and contained in Rule 14 of the Cenvat Credit Rules, 2004. - Decided in favor of assessee.

Summary

Issues:
1. Liability for payment of interest on reversed cenvat credit taken on capital goods.
2. Barred by limitation: SCN issued beyond one year from the relevant date.

Analysis:

Issue 1: Liability for payment of interest on reversed cenvat credit taken on capital goods
The case involved the appellant, a manufacturer of steel items, who reversed cenvat credit taken on capital goods without paying interest for delayed reversal. The Department contended that interest was due once irregular credit was taken and subsequently reversed. The appellant argued that the disputed goods qualified as inputs, not capital goods, and thus no loss to the Government occurred. They cited judgments supporting their position. The Tribunal found that since the eligibility of disputed goods for cenvat credit was not disputed and no excess credit was taken, interest liability was not justified. The Tribunal emphasized that interest aims to compensate for delayed statutory dues, which was not applicable in this case due to the nature of credit reversal and utilization for final product clearance.

Issue 2: Barred by limitation: SCN issued beyond one year from the relevant date
The appellant raised the issue of limitation, stating that the Show Cause Notice (SCN) was issued more than a year after the relevant period. The Tribunal agreed, noting that the proviso to section 11A was not invoked in the SCN, which did not allege suppression of facts or willful misstatement. Citing relevant case law, the Tribunal emphasized that the extended period of limitation should only apply in exceptional cases involving fraud or intent to evade duty. As the Department had prior knowledge of the credit details through filed returns, the Tribunal concluded that the SCN was time-barred. The Tribunal set aside the demand confirmed in the impugned order based on this limitation issue.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the appellant on both the liability for interest payment and the limitation aspect. The judgment highlighted the importance of adherence to statutory provisions and the need for clear evidence of fraudulent intent to extend the limitation period for issuing SCN.