2012 (6) TMI 24 - AT - Central Excise

Extended period of limitation Revenue neutrality - respondents are clearing certain inputs as such to their sister unit raising invoices and charging duty on assessable value Held that - extended period is not invokable. show-cause notice has been issued on 6.2.2008 for the period June, 2005 to October, 2006 by invoking extended period of limitation is not correct as the respondents are regularly filing. R I Return showing clearance of inputs as such on assessable value. in the case of Jay Yuhshin Ltd. (2000 (7) TMI 105 (Tri)) if the assessee himself has to bear the tax liability, there is a situation of revenue neutrality. Appeal filed by the Revenue is dismissed.

Summary

Issues:
Revenue appeal against setting aside of adjudication order based on Rule 3(5) of Cenvat Credit Rules, 2004 for clearing inputs to sister unit without reversing credit. Challenge on grounds of limitation and revenue neutrality.

Analysis:
The case involved an appeal by the Revenue against an order setting aside an adjudication order. The respondents were clearing inputs to their sister unit without reversing the credit availed, which was in violation of Rule 3(5) of the Cenvat Credit Rules, 2004. A show-cause notice was issued, and after adjudication, duty demand, interest, and penalty were imposed. The respondents appealed to the Commissioner (Appeals) citing limitation and revenue neutrality. The Commissioner held that the extended period of limitation was not applicable due to regular filing of returns showing clearance of inputs as such and that there was a situation of revenue neutrality, thus setting aside the adjudication order.

During the appeal, the Revenue argued that the Commissioner did not consider the requirement for the respondents to reverse the credit on cleared inputs as per Rule 3(5). On the other hand, the respondents' advocate acknowledged that on merit, the case was not in their favor as they were required to reverse the credit on cleared inputs. However, they contended that the Commissioner's decision on limitation and revenue neutrality, which the Revenue did not challenge, should be upheld.

Upon hearing both sides, the judge found that the Commissioner's decision to allow the appeal based on limitation and revenue neutrality was correct. The judge noted that the Revenue had only challenged the order on merit and not on the grounds of limitation and revenue neutrality. The judge agreed with the Commissioner's view that the extended period was not applicable due to regular filing of returns by the respondents. Additionally, the judge cited a Tribunal decision supporting the concept of revenue neutrality when the assessee bears the tax liability. Consequently, the judge upheld the impugned order, dismissing the Revenue's appeal as they did not challenge the order on the grounds of limitation and revenue neutrality.

In conclusion, the judgment upheld the decision to set aside the adjudication order based on the grounds of limitation and revenue neutrality, as the Revenue failed to challenge these aspects. The case serves as a reminder of the importance of considering all relevant legal aspects and grounds when appealing a judgment.