2021 (6) TMI 1110 - HC - Central Excise

Extended period of limitation - details of trading was available in the Balance Sheet of the respondent during the relevant period and that there was much confusion during the relevant period as to whether credit could be availed in respect of trading activities and the issue was in litigation leading to perversity? - mere availability of details of trading in Balance Sheet is sufficient to drop the demand for extended period on the ground that there was no suppression or not - Whether the CESTAT is right in attributing the prior knowledge of trading activity of the respondent ignoring the fact that the respondent produced the Balance Sheet only during the investigation and not prior to that? - demand for extended period of limitation and penalty. HELD THAT - Undisputed facts of the case are, as recorded in paragraph 6 of the show cause notice, it was issued based on the balance sheet for the year ending 2008. Thus, the contentions of the Revenue that respondents trading activity was not known to the department and that it was learnt based on intelligence report are not tenable. In Shriram Value Services Pvt. Ltd. 2019 (8) TMI 1174 - MADRAS HIGH COURT , the Madras High Court has held that at the relevant period of time. Viz., from April 2009 to March 2011, the Assessee was, obviously, under bona fide belief in view of the conflicting decisions of the Tribunals during that period and taking the trading activity as Exempted Services, availed the CENVAT Credit which is sought to be reversed and recovered by the Department invoking the extended period of limitation. Such a bona fide belief cannot be held to be done with ulterior purpose for evading the Duty and therefore, the extended period of limitation would not be available to the Revenue Authority in view of the aforesaid decision rendered by the Hon ble Supreme Court. The substantial questions raised by the Revenue are answered in favour of the assessee - Appeal dismissed.

Summary

Issues:
1. Whether CESTAT was correct in dropping the demand for an extended period based on the availability of trading details in the Balance Sheet and confusion regarding credit availing?
2. Whether CESTAT erred in ignoring factual findings in the Order-In-Original while dropping the demand for the extended period?
3. Is the availability of trading details in the Balance Sheet sufficient to negate suppression and drop the demand for an extended period?
4. Was CESTAT justified in assuming prior knowledge of trading activity by the respondent despite the Balance Sheet being produced only during the investigation?
5. Did CESTAT err in setting aside the demand for an extended period and penalties by relying on previous tribunal decisions, leading to perversity?

Analysis:
1. The case involved a respondent engaged in manufacturing and trading activities, with a show cause notice issued for wrongful Cenvat credit utilization related to trading. The Chief Commissioner held the credit inadmissible for trading, leading to an appeal where CESTAT confirmed the demand for the normal period but dropped the extended period demand due to confusion regarding credit availment for trading activities.
2. The appellant argued that the department was unaware of the trading activities until the intelligence report, challenging CESTAT's finding of prior knowledge. However, the court found that the show cause notice was based on the balance sheet, indicating the department's awareness of the trading activity, thus rejecting the appellant's contention.
3. The respondent contended that the trading activity was declared in the balance sheet, negating any suppression of facts. Citing a Madras High Court decision, it was argued that invoking the extended period without evidence of mala fide intent is not justified, leading the court to rule in favor of the respondent.
4. The court referenced the Madras High Court decision to emphasize that the respondent's belief in treating trading as exempted services during the relevant period was bona fide, and therefore, the extended period demand was not warranted. Consequently, the appeal was dismissed, and the questions raised by the Revenue were resolved in favor of the respondent.