2013 (7) TMI 790 - AT - Central Excise

Limitation Extended period for issuance of Show- Cause Notice Held that - Relying upon the decision of Tribunal in the case of Diamond Cements Ltd. vs. CCE Bhopal 2012 (6) TMI 73 - CESTAT, NEW DELHI , when during the relevant period, the decision of the Higher appellate forums were in favour of the assessee, no suppression can be alleged against the assessee - If the expert bodies, judicial as well as quasi judicial, have interpreted the law in favour of the assessee, the assessee cannot be held guilty of any suppression or mis-statement etc., longer period of limitation is not allowed Barred by limitation Decided in favor of Assessee. Rule 6(2) of CCR, 2004 Held that - Sub-rule (2) of Rule 6 of Cenvat Credit Rules does not require separate maintenance of records in respect of fuel, there is no requirement of proportionate reversal of credit when such fuel is ultimately used in the manufacture of exempted products This proposition is relied upon based upon the decision by Hon ble Punjab and Haryana High Court in the case of Commissioner of Central Excise, Ludhiana vs. Nestle India 2009 (8) TMI 510 - PUNJAB & HARYANA HIGH COURT ; Decision of Hon ble Gujarat High Court in the case of CCE vs. Charak Pharma P. Ltd. 2012 (11) TMI 475 - GUJARAT HIGH COURT ; Larger Bench of the Tribunal in the case of Gujarat Narmada Fertilizers Co. Ltd. reported in 2006 (12) TMI 9 - CESTAT,MUMBAI Decided in favor of Assessee.

Summary

Issues:
1. Interpretation of Rule 6(2) of Cenvat Credit Rules regarding maintenance of separate accounts for fuel used in the manufacture of dutiable and exempted final products.
2. Validity of demand and penalty imposed by Revenue for availing Cenvat credit on furnace oil without proportionate reversal.
3. Applicability of extended period of limitation in the case due to conflicting judicial decisions during the relevant period.

Analysis:
1. The judgment revolves around the interpretation of Rule 6(2) of Cenvat Credit Rules concerning the maintenance of separate accounts for fuel used in manufacturing dutiable and exempted final products. The appellants, engaged in manufacturing aerated water, utilized furnace oil in their captive power plant for steam generation, used in both dutiable and exempted products. The Rule did not mandate separate accounts for furnace oil. The Revenue initiated proceedings against the appellants for not proportionately reversing Cenvat credit on the entire quantity of furnace oil used.

2. Various judicial decisions were cited during the relevant period, including the judgments of High Courts and the Tribunal's Larger Bench. The Punjab and Haryana High Court and the Gujarat High Court held that no reversal of credit was required for fuel used in manufacturing both dutiable and exempted products. The Tribunal's Larger Bench also supported this view. However, the Supreme Court overruled the Tribunal's decision in a specific case. The appellant acknowledged the unfavorable Supreme Court decision but argued that favorable decisions during the relevant period justified no malafide on their part, rendering the demand time-barred.

3. The judgment considered the issue of extended period of limitation based on conflicting judicial interpretations during the relevant period. The Tribunal's precedent in a similar case highlighted that when higher appellate forums favored the assessee, no suppression could be alleged. Given the favorable interpretations by expert judicial bodies, the appellant could not be held accountable for any misstatement or suppression. Consequently, the demand was deemed time-barred, and the impugned order was set aside, granting relief to the appellant.