2010 (6) TMI 423 - AT - Central Excise

Demand limitation extended period - Cenvat Credit availed in respect of input services - towards payment of duty on excisable goods manufactured - Revenue stated that availment of credit of input services used at the site of WTG which were installed away from the factory premises of the appellant, was not available - as the electricity so generated from the WTG was not liable to tax Held that - appellants cannot be alleged to have suppression or mis-stated any fact so as to invoke longer period - penalty cannot be imposed upon the appellant - for the demand is within limitation period matter remanded

Summary

Issues involved:
Interpretation of Cenvat Credit Rules, invocation of extended period of limitation, imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004, and Rule 26 of Central Excise Rules, 2002.

Interpretation of Cenvat Credit Rules:
The appellant, registered as an "Input Service Distributor," availed Cenvat Credit for input services used at the site of Wind Turbine Generators (WTG) to generate electricity. The Revenue contended that credit for services used away from the factory premises was not admissible as the generated electricity was tax-exempt. A show cause notice was issued proposing to deny Modvat Credit availed by the appellant. The original adjudicating authority confirmed the demand, interest, and penalties, which were upheld by the Commissioner (Appeals), leading to the current appeal.

Invocation of Extended Period of Limitation:
The Commissioner (Appeals) invoked the extended period of limitation under Rule 14 of the Cenvat Credit Rules, 2004, stating that the appellant failed to ensure correct credit availment as per the rules. However, the Tribunal observed that the longer period can only be invoked in cases of positive suppression or misstatement by the assessee. As the appellant availed credit based on statutory documents and department knowledge, without any suppression or misstatement, the Tribunal held that the majority of the demand was time-barred. The Tribunal emphasized that legal interpretation differences do not imply suppression, especially when other similarly situated assesses were also availing the credit.

Imposition of Penalty:
The appellant's representative acknowledged adverse Tribunal judgments on merit but contested the penalty and limitation issues. The Tribunal noted that the penalty and longer period reasons were identical, requiring establishment of mala fide. Referring to precedents, the Tribunal held that legal interpretation issues do not warrant penalty imposition. It emphasized that the demand beyond the normal limitation period was largely time-barred, and penalty could not be justified. Consequently, the Tribunal directed the quantification of the demand within the limitation period and remanded the matter for further proceedings.

Conclusion:
The Tribunal disposed of the appeal, emphasizing that the appellant could not be held liable for suppression or misstatement, leading to the majority of the demand being time-barred. The decision highlighted that differences in legal interpretation do not amount to mala fide conduct warranting penalty imposition. The matter was remanded for quantifying the demand within the limitation period.