2014 (9) TMI 331 - HC - Central Excise

Reopening of assessment - Cenvat Credit - reasonable steps before availing credit - original manufacturer of fabrics were alleged to be fictitious - endorsed invoices - period of limitation - Held that - Issues being identical all the questions raised in this tax appeal require to be answered in the same manner as done in the case of Prayagraj Dyeing & Printing Mills Pvt. Ltd. & Org. v. Union of India & Ors. 2013 (5) TMI 705 - GUJARAT HIGH COURT Merely because today, the original manufacturer, who is registered with the Revenue, is not traceable, it does not mean that he did not exist at the relevant point of time. If today, a manufacturer is not available for various reasons that does not mean that at the relevant point of time, such manufacturer who was registered with the Central Excise, did not exist. Reasonable steps - held that - The Appellants in these cases, however, not having taken those steps, cannot get the benefit of the credit even though he is not party to fraud. Period of limitations - held that - in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. 2007 (7) TMI 299 - SUPREME COURT where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act. The documents, invoices in question, issued by the registered licencee being genuine and in the absence of any allegations against the appellants of fraud, the Tribunal should not have remanded the matter back as the claim was totally barred by limitation. - Decided in favor of assessee.

Summary

Issues Involved:

1. Validity of show cause notice issued based on Alert Circulars.
2. Permissibility of invoking the extended period of limitation.
3. Applicability of Rule 12B of the Central Excise Rules to a textile processing unit.
4. Validity of the Tribunal's order remitting the case for further investigation.

Detailed Analysis:

Issue 1: Validity of Show Cause Notice Issued Based on Alert Circulars

The court examined whether the show cause notice issued to the appellant, based solely on Alert Circulars, was valid. It was concluded that the show cause notice was not based on Alert Circulars. Therefore, this issue did not arise in the facts of the present case.

Issue 2: Permissibility of Invoking the Extended Period of Limitation

The court analyzed whether the invocation of the extended period of limitation was permissible. It was determined that the extended period of limitation could not be applied in this case. The court emphasized that Section 11A(1) of the Central Excise Act is applicable only when there is a positive evasion of duty, and mere failure to pay duty does not justify invoking the extended period. Since there was no allegation of fraud against the appellant, the extended period of limitation was not applicable.

Issue 3: Applicability of Rule 12B of the Central Excise Rules

The court examined whether Rule 12B of the Central Excise Rules was applicable to the appellant, a textile processing unit, and whether the Tribunal's view that the appellant was a job worker covered under Rule 12B was correct. The court held that the Tribunal's view was correct and sustainable. The appellant did not take reasonable steps to ensure that the inputs or capital goods in respect of which CENVAT credit was taken were the goods on which appropriate duty of excise had been paid, as required by Rule 7(2) of the Cenvat Credit Rules.

Issue 4: Validity of the Tribunal's Order Remitting the Case for Further Investigation

The court evaluated the validity of the Tribunal's order remitting the case for further investigation and verification of facts. It was found that the Tribunal should not have remanded the matter back, as the claim was barred by limitation. The documents and invoices in question were issued by a registered licensee and were genuine. In the absence of any allegations of fraud against the appellant, reopening the transactions after the period of limitation was not justified.

Conclusion:

The court answered the questions of law formulated by the Division Bench as follows:

- Question No. 1: Does not arise as the show cause notice is not based on alert circular.
- Question No. 2: In the negative and in favor of the Revenue.
- Question No. 3: In the negative and in favor of the Revenue.
- Question No. 4: In the negative and in favor of the Revenue.
- Question No. 5: In the negative and in favor of the Revenue except on the question of larger period of limitation.
- Question No. 6: In the negative and in favor of the Revenue.
- Question No. 7: In the negative and in favor of the Revenue except the question of larger period of limitation which was not the subject matter in that case.
- Question No. 8: In the affirmative and against the Revenue.

The court reversed the impugned judgment of the Tribunal and allowed the appeal accordingly. The Civil Application was disposed of in view of the order passed in the Tax Appeal.