2018 (4) TMI 1673 - AT - Central Excise

CENVAT Credit - Additional duty of Excise (AED - GSI) - time limitation - Held that - The observation of the learned Commissioner that AED - GSI credit taken cannot be utilized for payment of duty other than AED - GSI is erroneous - Identical issue decided in the case of MODI RUBBER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT 2000 (3) TMI 124 - CEGAT, NEW DELHI wherein, this Tribunal held that credit of AED - GSI can be used for payment of BED or any other final product as per proviso to Rule 57F(12) - there is no error in taking of Cenvat credit of AED - GSI during the period under dispute. Time limitation - Held that - There is no merits in the appeal of Revenue which is against the dropping of the demand proposed in show cause notice dated 4th January, 1999 holding the same to be barred by limitation following the ruling of Hon ble Supreme Court in the case of Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT OF INDIA . Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Wrongful availment of Cenvat credit of Additional Duty of Excise (AED-GSI).
2. Validity of Show Cause Notices (SCNs) and their limitation periods.
3. Utilization of AED-GSI credit for payment of other duties.
4. Imposition of penalties under various provisions.

Issue 1: Wrongful Availment of Cenvat Credit of AED-GSI

The primary issue revolves around the alleged wrongful availment of Cenvat credit of AED-GSI amounting to ?21,59,27,611/- during the period from 16/03/1995 to 31/03/2000. The Revenue contended that the cause of action arose with the introduction of Section 88 of the Finance Act, 2004, which retrospectively amended the Cenvat Credit Rules, 2002. According to the Revenue, as per Sub-section 4 of Section 88, recovery of the said credit along with interest was required where the credit had been utilized for payments other than AED-GSI. However, it was argued that prior to 01/04/2000, there was no bar on utilizing the credit of AED-GSI towards payment of AED-GSI at any point in time.

Issue 2: Validity of Show Cause Notices (SCNs) and Their Limitation Periods

Three SCNs were adjudicated in the impugned Order-in-Original:

- SCN dated 11.01.2005 for the period 16.03.1995 to 31.03.2000, questioning the taking of credit of AED-GSI.
- SCN dated 03.08.1998 for the period January 1998 to 01.06.1998, demanding AED-GSI on Dipped Tyre Cord Fabric (DTCF).
- SCN dated 04.01.1999 for the period 16.03.1995 to 31.12.1997 on the same grounds as the SCN dated 03.08.1998.

The Adjudicating Authority dropped the SCN dated 11.01.2005 but observed that the credit of AED-GSI could only be utilized for payment of AED-GSI and not for any other duty. The appellant-assessee challenged this observation. The SCN dated 03.08.1998 was upheld with penalties imposed, which the appellant-assessee also contested. The SCN dated 04.01.1999 was dropped as being time-barred, which the Revenue appealed against.

Issue 3: Utilization of AED-GSI Credit for Payment of Other Duties

The appellant-assessee argued that the Adjudicating Authority erred in making a qualifying remark that the credit of AED-GSI could only be utilized for the payment of AED-GSI. It was contended that this issue was beyond the scope of the SCN, which only questioned the taking of the credit, not its utilization. The appellant cited a decision by the Principal Bench of the Tribunal, upheld by the Allahabad High Court, which allowed the use of AED-GSI credit for payment of Basic Excise Duty (BED) or any other final product duty as per the proviso to Rule 57F(12).

Issue 4: Imposition of Penalties Under Various Provisions

The appellant-assessee also contested the penalties imposed in relation to the SCN dated 03.08.1998. It was argued that the penalty provisions under Rule 209 are subject to Section 11AC of the Central Excise Act, 1944, which requires the establishment of mens rea. The Adjudicating Authority had found no mens rea, thus the penalties were argued to be unsustainable.

Judgment Analysis:

1. On the Issue of Wrongful Availment of Cenvat Credit:
The Tribunal found no error in the taking of Cenvat credit of AED-GSI during the disputed period. The observation that AED-GSI credit could not be utilized for payment of other duties was deemed erroneous, as the issue had been settled in favor of the appellant-assessee by both the Tribunal and the Allahabad High Court.

2. On the Validity of SCNs and Limitation Periods:
- SCN dated 11.01.2005: The Tribunal upheld the dropping of this SCN but set aside the qualifying remarks regarding the utilization of credit.
- SCN dated 03.08.1998: The Tribunal noted that the appellant had paid the demanded amount without prejudice to their rights and contentions. However, the penalties imposed were contested.
- SCN dated 04.01.1999: The Tribunal upheld the Adjudicating Authority's decision to drop this SCN as time-barred, relying on the Supreme Court's ruling in the Nizam Sugar Factory case, which held that extended periods could not be invoked when facts were already known to the authorities.

3. On Utilization of AED-GSI Credit:
The Tribunal confirmed that AED-GSI credit could be used for payment of BED or any other final product duty, as per the proviso to Rule 57F(12), aligning with previous Tribunal and High Court rulings.

4. On Imposition of Penalties:
The Tribunal found that the penalties imposed under Rule 209 were unsustainable due to the lack of mens rea, as established by the Adjudicating Authority. The penalties were thus set aside.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the appellant-assessee's appeal, setting aside the erroneous observations and penalties imposed by the Adjudicating Authority. The Tribunal confirmed the appellant-assessee's entitlement to utilize AED-GSI credit for payment of other duties in accordance with the law.

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