2014 (11) TMI 868 - AT - Central Excise

Waiver of pre deposit - Cenvat Credit - suppression or wilfull mis-statement of facts - Invocation of extended period of limitation - Held that - Show Cause Notice admits that the appellants had been regularly filing the ER-1 returns showing all the details. The adjudicating authority has held that the noticee was required to declare material facts instead of taking a plea that it was not required to declare or submit details of goods on which Cenvat Credit was taken. The adjudicating authority does not quote any provision of law under which they were required to declare the material facts; the adjudicating authority does not elaborate as to what material facts were required to be declared and under which provision of law. It is a fact that the description of goods on which Cenvat credit is taken is not required to be declared in the ER-1 returns. They mentioned every detail required to be mentioned in the ER-1 returns. The adjudicating authority has equated suppression with non-declaration of something not even required to be declared as per law. prima facie the appellants have a fairly good case atleast for non-invokability of the extended period as a consequence of which the impugned demand would be hit by time bar. The appellants have also contended that the impugned credit is admissible on merit also but without going into a detailed analysis of the appellant s contentions on merit, at this stage, we find that on the ground of time-bar alone, a goods case is made out for waiver of pre-deposit. - Stay granted.

Summary

Issues:
1. Admissibility of Cenvat credit on specific goods.
2. Invocation of extended period for demand.
3. Imposition of mandatory penalty for suppression of facts.

Admissibility of Cenvat Credit on Specific Goods:
The appellants filed a stay application and appeal against an order confirming a demand for inadmissible Cenvat Credit amounting to Rs. 4,49,64,397. The Adjudicating authority denied credit on certain goods like calcium silicate board, H.R. plate, H.R. coils, etc., stating they did not qualify as capital goods or components under Cenvat Credit Rules 2004. The appellants argued that credit for materials used in the power plant and boiler setup was admissible as they were procured by them and provided to contractors. They claimed no suppression or willful misstatement, thus challenging the invocation of the extended period for demand.

Invocation of Extended Period for Demand:
The Show Cause Notice invoked the extended period based on the appellants' alleged suppression of facts regarding irregular Cenvat credit availed. The notice mentioned the appellants' submission of ER-1 returns without disclosing specific use of goods to evade detection of credit misuse. The Adjudicating authority justified invoking the extended period by alleging suppression and fraudulent availment of Cenvat credit. However, the appellants argued that they disclosed all necessary details in the ER-1 returns, and the authority's requirement to declare additional "material facts" lacked legal basis. They cited legal precedents stating that the extended period applies only when positive actions beyond mere inaction are proven.

Imposition of Mandatory Penalty for Suppression of Facts:
The Adjudicating authority imposed a mandatory penalty for suppression of facts, citing the appellants' failure to declare material facts despite submitting ER-1 returns. The authority held that the appellants should have disclosed details of goods for which Cenvat credit was taken, penalizing them under Cenvat Credit Rules 2004 and Central Excise Act 1944. However, the appellants contested this penalty, arguing that they fulfilled their reporting obligations and that the authority's interpretation of suppression was unfounded. They highlighted legal principles indicating that suppression requires positive actions, not mere omissions, for the extended period to be invoked.

In conclusion, the appellate tribunal found merit in the appellants' argument regarding the non-invocability of the extended period, potentially rendering the demand time-barred. While a detailed analysis of the admissibility of credit on merit was deferred, the tribunal considered the strong case for waiving the pre-deposit based on the time-bar issue alone. Consequently, the tribunal waived the pre-deposit of adjudicated liabilities and stayed the recovery pending the appeal process.