2016 (6) TMI 824 - AT - Central Excise

Demand of duty - disallowance of credit availed on MS items - extended period of limitation - Reduction in penalty - Held that - the assessee s contention that prior to the judgment in Vandana Global Ltd. 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) case, they entertained a bona fide belief that credit is admissible is not without force. Further Revenue has not adduced any evidence to establish that there was suppression of facts with intent to evade payment of duty. I find that Revenue has miserably failed to establish sufficient ground to invoke the extended period. ER-1 returns filed by the assessee are required to be subject to detailed scrutiny in course of which the concerned officer can call for documents from the assessee wherever necessary for the scrutiny. In the present case, we find that the starting of the enquiry was stated to be scrutiny of ER-1 Returns. This was done apparently after two years. Invoking extended period for demand is not tenable in such a situation. The show-cause notice is barred by limitation. In the result, the impugned order is set aside and appeal filed by assessee is allowed with consequential reliefs - Decided in favor of assessee.

Summary

Issues:
1. Disallowance of credit availed on MS items by the assessee.
2. Reduction of penalty challenged by the Revenue.

Analysis:
1. The case involved two appeals challenging the order passed by the Commissioner(Appeals). The first appeal was filed by the assessee regarding the disallowance of credit on MS items, while the second appeal was filed by the Revenue challenging the reduction of penalty. The assessee, engaged in cement manufacturing, availed CENVAT credit on inputs and capital goods. A show-cause notice alleged irregular credit availed on MS items used for erection and fabrication works. The original authority confirmed the disallowance of credit, recovery with interest, and imposed a penalty. The Commissioner(Appeals) upheld the disallowance of credit and interest demand but reduced the penalty. The assessee challenged the disallowance of credit, while the Revenue challenged the penalty reduction.

2. The assessee gave civil contracts for steel fabrication during the setup of a new unit. They availed credit on structural steel used in fabrication works. The assessee argued that credit on certain items was admissible before a specific amendment. The assessee contended that the demand was time-barred due to disclosure in ER-1 returns. The Revenue supported the impugned order, citing precedents. The Tribunal noted the contentious issue of credit admissibility on structural items and the lack of evidence of suppression by the Revenue.

3. The Larger Bench's judgment in Vandana Global Ltd. case was pivotal, stating that credit on MS items for sheds and buildings was inadmissible. Prior decisions showed conflicting views on credit admissibility. The Tribunal found the Revenue failed to prove suppression of facts to invoke the extended period. Citing legal precedents, the Tribunal emphasized that suppression must involve deliberate intent to evade duty payment. The Tribunal concluded that the show-cause notice was time-barred, setting aside the impugned order and allowing the assessee's appeal while dismissing the Revenue's appeal.

4. The Tribunal's decision aligned with the case law, emphasizing the strict interpretation of suppression for invoking the extended period. The Tribunal highlighted the necessity of positive acts of suppression and the burden of proving mala fide intentions. Scrutiny of ER-1 returns was crucial, and delayed inquiries without valid reasons were deemed untenable. Following the legal principles, the Tribunal ruled in favor of the assessee, allowing their appeal due to the time-barred show-cause notice and dismissing the Revenue's appeal.

5. In conclusion, the Tribunal's detailed analysis focused on the admissibility of credit on MS items, the issue of limitation, and the lack of evidence supporting suppression by the Revenue. The judgment highlighted legal precedents, emphasizing the stringent criteria for invoking the extended period and the burden of proof on allegations of mala fide intentions. The Tribunal's decision favored the assessee, setting aside the impugned order due to the time-barred show-cause notice and dismissing the Revenue's appeal.