2019 (8) TMI 1506 - AT - Central Excise

Excisability - waste and scrap - no separate inventory of scrap generated was maintained - period January 2004 to March 2008 - extended period of limitation - HELD THAT - It is very clear that the issue was in the knowledge of the department right from 1999. Superintendent incharge of the factory was in correspondence with the officers of the appellants right from 1999 onwards. Two Show Cause Notices have been issued during the interregnum and the same have been remanded back from the appellate stages. During the pendency of such remand proceedings the impugned proceedings have been initiated invoking the extended period. We find that this is not legally permissible. The Show Cause Notice and the Impugned Order do not survive on limitation - the appeal is allowed on limitation.

Summary

Issues:
1. Barred by limitation - Show Cause Notice invoking extended period of limitation.
2. Coherence and transparency in payment of duty for scrap cleared.
3. Legal provisions under Cenvat Credit Scheme.
4. Department's verification of Cenvat records.
5. Knowledge of department regarding the issue since 1999.

Analysis:

1. Barred by Limitation - Extended Period of Limitation:
The case involved the Appellants availing Cenvat Credit of Excise Duty on inputs and capital goods. The department observed discrepancies in the value of scrap between trial balance and excise returns. Show Cause Notices were issued invoking extended periods of limitation, covering periods from 1997 to 2008. The Tribunal found that the issue was known to the department since 1999, with multiple remands and notices issued. Citing legal precedents, the Tribunal held that the Show Cause Notice and the Impugned Order did not survive on limitation, as extended periods cannot be invoked in subsequent notices. Consequently, the Tribunal allowed the appeal solely on the grounds of limitation.

2. Coherence and Transparency in Payment of Duty for Scrap Cleared:
The department noticed inconsistencies in the payment of excise duty for scrap cleared by the Appellants. It was revealed that there was no coherent and transparent policy followed by the Appellants regarding duty payment for the cleared scrap. The lack of a separate inventory for generated scrap further complicated the issue. These discrepancies led to the issuance of Show Cause Notices and subsequent legal proceedings.

3. Legal Provisions under Cenvat Credit Scheme:
The Appellants argued that there were no legal provisions under the Cenvat Credit Scheme for payment or reversal of credit when scrap was generated from inputs or capital goods on which Cenvat was availed. They maintained that the scrap in question was from dismantling structural items of iron and steel, where no credit was availed as per their policy. This argument raised questions about the applicability of Cenvat rules to the specific scenario of scrap generation and clearance.

4. Department's Verification of Cenvat Records:
The Appellants contended that the department had not properly verified their Cenvat records before confirming the remand. This allegation suggested a lack of thorough investigation or oversight by the department in assessing the Appellants' compliance with excise duty regulations.

5. Knowledge of Department Since 1999:
The Tribunal highlighted that the issue regarding scrap generation and clearance was known to the department since 1999. Correspondence between the department and the Appellants, along with previous notices and remands, indicated a long-standing awareness of the matter. The Tribunal deemed the initiation of the impugned proceedings invoking the extended period during the pendency of remand proceedings as legally impermissible, ultimately leading to the appeal being allowed solely on the grounds of limitation.