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2015 (12) TMI 1152 - AT - Central ExciseNon reversal of outstanding CENVAT Credit while availing SSI Exemption - Rule 11 of CCR - Held that - Appellants filed a declaration for availing exemption under notification No. 8/03 on 1.4.2006. Although an obligation is being cast on the appellant to discharge their obligation as per Rule 11(2) of Cenvat Credit Rules, 2004 but when the appellant filed the declaration for opting the exemption. Now the duty cast on the department to verify whether they have discharged their obligation for availing the exemption or not which was not done by the Revenue within time. Thereafter in 2010, an audit took place and it was came to the knowledge of the department that the appellant has not discharged their obligation under Rule 11(2) of Cenvat Credit Rules 2004. Thereafter a show cause notice was issued on 5.5.11 which is also beyond the normal period of limitation. Admittedly in this case, show cause notice has been issued after 5 years of filing the declaration by the appellant. Therefore relying on the decision of Muhammed Ismail Mills (2014 (1) TMI 1647 - MADRAS HIGH COURT), I hold that show cause notice is barred by limitation. In these terms, impugned order is set aside - Decided in favour of assessee.
Issues:
- Duty, interest, and penalty imposed on the appellant - Obligation under Rule 11(2) of Cenvat Credit Rules, 2004 - Barred by limitation - show cause notice issued after 5 years Analysis: Issue 1: Duty, interest, and penalty imposed on the appellant The appellant was in appeal against an order imposing duty, interest, and penalty for not reversing the Cenvat Credit attributable to inputs, work in progress, and finished goods in their stock upon opting for exemption under notification No. 8/03. The appellant had filed a declaration for exemption but did not reverse the Cenvat Credit as required by Rule 11(2) of Cenvat Credit Rules, 2004. The audit revealed the non-compliance, leading to a show cause notice and subsequent confirmation of duty with penalties. The Commissioner (Appeals) allowed the unutilized Cenvat Credit but confirmed the balance duty with penalties. The appellant challenged this order. Issue 2: Obligation under Rule 11(2) of Cenvat Credit Rules, 2004 The appellant argued that the show cause notice issued after 5 years of filing the declaration for exemption was barred by limitation. The appellant contended that although there was an obligation to discharge under Rule 11(2) of Cenvat Credit Rules, 2004, the notice was time-barred. The appellant relied on a decision by the Hon'ble Madras High Court to support this argument. The Revenue, on the other hand, maintained that the notice was within the 5-year period as the non-reversal of Cenvat Credit was discovered during an audit in 2010. The Revenue cited relevant case laws to support their position. Issue 3: Barred by limitation - show cause notice issued after 5 years The Tribunal considered the facts that the appellant had filed a declaration for exemption in 2006, and the obligation to verify compliance rested with the department. The audit in 2010 revealed the non-compliance, leading to the issuance of a show cause notice in 2011, which was beyond the normal limitation period. Relying on the decision cited by the appellant, the Tribunal held that the notice was indeed barred by limitation. Consequently, the impugned order imposing duty, interest, and penalties was set aside, and the appeal was allowed with any consequential relief. This detailed analysis covers the issues of duty imposition, compliance with Cenvat Credit Rules, and the limitation period for issuing a show cause notice, providing a comprehensive understanding of the legal judgment.
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