2011 (2) TMI 1009 - AT - Central Excise

Cenvat credit denied - Penalty under Section 11AC of the Central Excise Act - supplier manufacturer has not paid duty in respect of two invoices - contention of assessee that the investigation was completed on 12.09.2002 and the Show Cause Notice was issued on 24.09.2004 hence in absence of allegation of suppression the demand is time barred - Held that - Period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date,thus Revenue can issue Show Cause Notice within five years from date of knowledge in case of suppression with intent to evade duty, thus no merit in contentions of appellant that demand is time barred.

Summary

Issues:
1. Denial of credit and imposition of penalty under Section 11AC of the Central Excise Act.
2. Allegation of time bar in issuing the Show Cause Notice.

Analysis:
1. The Appellants filed an Appeal against an order confirming a demand of Rs.2,27,166.84, denying credit and imposing penalties under Section 11AC of the Central Excise Act. The Appellants were availing credit under the CENVAT Credit Scheme for duty paid on inputs used in manufacturing the final product. The issue arose when it was discovered during verification that the supplier had not paid duty on two specific invoices, leading to a Show Cause Notice against the Appellants. The Adjudicating Authority confirmed the demand and penalties, which was upheld by the Commissioner (Appeals). The Appellants argued that they were not associated with the investigation, the demand was time-barred due to lack of suppression allegations, and cited a Tribunal decision in support. The Revenue contended that the investigation revealed non-payment of duty against the invoices, supported by a High Court decision on suppression. The Tribunal found that credit was rightly denied for the invoices where duty was not paid by the supplier.

2. The Appellants argued that the demand was time-barred as the investigation was completed in 2002, and the Show Cause Notice was issued in 2004, beyond the statutory period. The Tribunal examined the relevant legal provisions and cited a High Court decision clarifying the period for issuing Show Cause Notices in cases of suppression with intent to evade duty. The High Court ruled that in such cases, the period for issuing notices can be extended to five years from the relevant date, emphasizing that the concept of knowledge by the department does not affect the statutory limitation period. The Tribunal concluded that the Revenue could issue a Show Cause Notice within five years from the date of knowledge in instances of suppression, rejecting the Appellants' argument that the demand was time-barred. Consequently, the appeal was dismissed based on the legal interpretation provided by the High Court decision cited.