2014 (5) TMI 603 - HC - Central Excise

Duty demand - Invocation of extended period of limitation - MODVAT Credit - capital goods namely angles, beams, plates, M.S. Channels, sheets, welding rods, etc. - Whether the Tribunal committed substantial error of law in holding that the assessee was under bona fide belief that the items in question were capital goods for the purpose of Modvat Credit and, therefore, the Department was not entitled to invoke extended period of limitation and consequent demand of duty for the extended period of limitation as well as penalty imposed was liable to be set aside - Held that - it could very well be seen that the assessee had a decision in his favour and therefore it was reasonable on its part to hold a belief that the Cenvat credit was available. It was only subsequently that the issue came to be decided against him. It was hardly a relevant aspect. The assessee acted bona fide and in honest belief that Cenvat credit was available. In the facts and circumstances, no intention could be ascribed on the part of the assessee to evade the duty or suppress any fact. In that view, there was no justification in invoking the longer period of limitation beyond the normal period as the conditions therefor were not satisfied. The question formulated does not raise any substantial question of law - Decided against Revenue.

Summary

Issues:
1. Whether the Tribunal erred in holding that the assessee was under a bona fide belief that certain items were capital goods for Modvat Credit, thereby disallowing the Department from invoking an extended period of limitation and demanding duty and penalty.

Analysis:
The case involved the appellant, an assessee engaged in manufacturing excisable goods falling under Chapter 48 of the Central Excise Tariff Act, 1985. The appellant availed Cenvat credit on capital goods used for construction outside the plant area, leading to a show cause notice for duty, penalty, and interest. The Cenvat Credit Rules, 2004, allow credit on capital goods used directly or indirectly in the factory premises for manufacturing final products, not for goods used outside the plant or in an office.

The Tribunal's order was based on the appellant's bona fide belief, considering earlier decisions in their favor, that the items were capital goods eligible for Modvat credit. The Tribunal quashed the demand beyond the normal limitation period but upheld the demand within the limitation period. The appellant's honest belief and lack of intention to evade duty or suppress facts were crucial in the Tribunal's decision. The appellant's reliance on a previous decision in their favor was reasonable until a subsequent decision went against them.

The Tribunal's decision was supported by the fact that the appellant acted in good faith and lacked any intention to evade duty. The Tribunal found no justification for extending the limitation period as the conditions for doing so were not met. Therefore, the appeal was dismissed as it lacked merit based on the facts, findings, and discussions presented in the case.

In conclusion, the Tribunal's decision to uphold the appellant's bona fide belief regarding the availability of Cenvat credit on certain items, considering earlier decisions in their favor, was crucial in dismissing the appeal. The appellant's honest belief and lack of intention to evade duty were significant factors in the Tribunal's decision to quash the demand beyond the normal limitation period.