2011 (6) TMI 271 - HC - Central Excise

Cenvat credit - double availing credit - Prima facie, the claim of the appellants appears to be that this availing of credit twice on two invoices of the same date indicates at least a wilful mistake or suppression of facts, if not a fraud - We, therefore, inclined to set aside the order of the CESTAT, in regard to demand and hold that the show cause notice could be treated as barred by limitation - Accordingly set aside the order of the CESTAT and remand the matter back to the Additional Commissioner of Customs and Central Excise, for determination as to the validity of the demand in relation to the double availing credit.

Summary

Issues involved:
1. Time bar on the claim of the Revenue.
2. Interpretation of Section 11A of the Central Excise Act, 1944 regarding limitation for issuing show cause notice.
3. Burden of proof in cases of fraud, collusion, or wilful misstatement.

Analysis:

Issue 1: Time bar on the claim of the Revenue
The appeal by the Commissioner of Central Excise challenged the order upholding the time bar on the Revenue's claim. The Deputy Commissioner issued a show cause notice in 1999 alleging illegal claims made by the respondent-Company. The Additional Commissioner confirmed certain demands but not all. The Commissioner (Appeals-II) upheld the time bar on the claim. The CESTAT dismissed the second appeal, leading to the current appeal.

Issue 2: Interpretation of Section 11A of the Central Excise Act
The appellant argued that the show cause notice was not time-barred under Section 11A of the Act, which allows for an extended period of limitation in cases of fraud, collusion, wilful misstatement, or suppression of facts. Citing the Supreme Court's judgment in Commissioner of Central Excise vs. Bajaj Auto Limited, the appellant emphasized that the burden of proof lies on the Department to establish the existence of fraud or other conditions for the extended limitation period.

Issue 3: Burden of proof in cases of fraud, collusion, or wilful misstatement
Referring to the Supreme Court's ruling, the Court found that the CESTAT erred in holding the show cause notice as time-barred for the demand related to availing credit twice. The Court noted that the double availing of credit indicated a potential wilful mistake or suppression of facts, if not fraud. Consequently, the Court set aside the CESTAT's order on this demand, remanding the matter for further determination by the Additional Commissioner in line with the law.

This judgment clarifies the application of Section 11A of the Central Excise Act concerning the limitation for issuing show cause notices in cases involving fraud or wilful misstatement. It highlights the importance of establishing the existence of such conditions to extend the limitation period and the burden of proof on the Department. The decision also underscores the need for a strict interpretation of the proviso to Section 11A and the shifting burden of proof onto the assessee once the Department presents material indicating fraudulent activities.