2015 (12) TMI 1256 - AT - Central Excise

Reversal of proportionate CENVAT Credit - clearance of exempted final products - Held that - The impugned order of Commissioner (A) dropping the penalty does not stand challenged by the Revenue and as such has attained finality. Inasmuch as the appellate authority has observed that there is no mala fide on the part of the assessee, I find that invocation of longer period is not justified on the said ground itself. It is well settled law the circumstances for invocation of longer period and for imposition of penalties on an assessee are identical. Once the bona fide of the appellants are not being doubted for the purpose of imposition of penalty, the same cannot be doubted for the purpose of invocation of longer period. As such, I agree with the learned advocate that extended period cannot be invoked against them. On this ground itself I set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant's failure to reverse CENVAT credit on certain inputs justifies the invocation of a longer period for demand confirmation.
2. Whether the appellant's failure to reverse credit on specific inputs due to a bona fide mistake warrants an extension of the limitation period.
3. Whether the dropping of penalty by the Commissioner (A) on the grounds of no malafide intentions by the appellant impacts the justification for invoking a longer period for demand confirmation.

Analysis:
1. The appellants, engaged in manufacturing dutiable and exempted final products, did not reverse the proportionate CENVAT credit on certain inputs like gas, iron, and inward transportation when clearing exempted final products. A show-cause notice was issued proposing a demand confirmation under Rule 6(3) of CENVAT Credit Rules for the period July 2005 to February 2007, invoking the longer period of limitation.

2. The appellant's advocate argued that the non-reversal of credit on specific inputs was due to a bona fide mistake, as they had reversed credit on major inputs. The advocate contended that despite regular filings and audits, the lapse was not highlighted earlier. The plea was for an extension of the limitation period due to the absence of malafide intentions on the appellant's part.

3. The Commissioner (A) had dropped the penalty, acknowledging the appellant's lack of intent to evade duty, especially considering the appellant's status as a public sector unit supplying goods to Defense. The appellate authority concurred that there was no malafide intent on the appellant's part, leading to the conclusion that the invocation of a longer period was unjustified. The decision highlighted that if the bona fide of the appellant was not in question for penalty imposition, it should also not be doubted for invoking a longer period. Consequently, the impugned order was set aside, and the appeal was allowed, providing relief to the appellant.