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2014 (2) TMI 1321 - HC - Central ExciseCENVAT credit - goods manufactured out of common inputs without payment of duty as well as on payment of duty - suppression of facts - Time limitation - Circular dated 30-4-1975 - Held that - when the respondent-assessee had been furnishing regular returns on monthly basis disclosing therein about clearing goods manufactured out of common inputs without payment of duty as well as on payment of duty, then, there appears to be no suppression of facts with an intention to evade payment of duty - the CESTAT was correct in holding that the demands beyond the normal period of limitation are time-barred and therefore, correctly set aside the submission of the Revenue. In so far as the subsequent period is concerned, in our view, the CESTAT, after accepting the contention of the respondent-assessee, accepted the offer of the respondent-assessee that they would reverse the entire credit on the common inputs - The assessee, having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal as regards reversal of the amount involved under such a situation, the High Court held that when the matter has been remanded back to the Adjudicating Authority to redetermine the credit in accordance with law there was no substantial question of law and accordingly dismissed the appeal of the Revenue. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the respondent-assessee was liable to reverse Cenvat credit on inputs used in the manufacture of exempted by-products (DOC and Gum). 2. Whether there was suppression of facts by the respondent-assessee with an intent to evade payment of duty. 3. Whether the demand for duty beyond the normal period of limitation was time-barred. Detailed Analysis: 1. Liability to Reverse Cenvat Credit on Inputs: The respondent-assessee, engaged in the manufacture of refined vegetable oil, availed Cenvat credit on inputs like hexane, caustic soda, and phosphoric acid. The Adjudicating Authority (AA) contended that the respondent-assessee was manufacturing both dutiable and exempted goods (DOC and Gum) but failed to maintain separate accounts for inputs used in the manufacture of these goods, as required under Rule 6(2) of the erstwhile Cenvat Credit Rules, 2002 and Rule 6(2) of the Cenvat Credit Rules, 2004. The AA argued that the respondent-assessee should have reversed an amount equal to 8% (later 10%) of the price of DOC and Gum at the time of their clearance, as per Rule 6(3). The AA issued a show cause notice, demanding recovery of Rs. 8,84,29,478/- along with interest and penalties. 2. Suppression of Facts: The respondent-assessee argued that they did not produce two or more final products necessitating separate records for Cenvat credit. They claimed that DOC and Gum were by-products, not final products, and thus Rule 6 did not apply. They also cited repeated clarifications from the Ministry of Finance under Rule 57D, stating that credit should not be denied on inputs contained in waste or by-products, even if exempt from duty. The respondent-assessee maintained that they had been filing regular returns, showing clearances of both dutiable and exempted goods, and thus there was no suppression of facts. 3. Demand Beyond the Normal Period of Limitation: The Tribunal found that the Revenue was aware of the respondent-assessee's practice of taking credit on common inputs and clearing both dutiable and exempted goods as early as 26-6-2003. Therefore, the charge of suppression with an intent to evade duty was not sustainable. For the period beyond the normal limitation, the Tribunal held the demand time-barred. For the remaining period, the Tribunal accepted the respondent-assessee's offer to reverse the entire credit on common inputs and remitted the matter to the AA for re-determination. Judgment Summary: The High Court upheld the Tribunal's findings. It agreed that there was no suppression of facts by the respondent-assessee, as they had been regularly filing returns and the Revenue was aware of their practices. The Court found no illegality or perversity in the Tribunal's order, which correctly applied the provisions of law. The demand beyond the normal period of limitation was time-barred, and the Tribunal's direction to reverse the entire credit on common inputs for the remaining period was in accordance with relevant rules. The High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's order.
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