2016 (7) TMI 988 - AT - Central Excise

Cenvat Credit - manufacture of dutiable and exempted final products - revenue submitted that assessee has neither maintained separate accounts nor paid an amount equal to 5%/10% on the value of clearances of exempted final products in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004. - Extended period of limitation - Held that - though the appellant claims that they reversed Cenvat credit on account of input services, the Revenue has not got such proof of reversal of Cenvat credit on input services. It is, therefore, held that in order to get the benefit on the subject payment/reversal of credit, a clear cut proof evidencing reversal of Cenvat credit of inputs has to be produced by the appellant before the Revenue. In case of this demand, we find that the plea of time-bar, where-under the appellant says that the demand for the period prior to July 2011 is barred by limitation is a valid argument as there has not been any clear cut proof available to substantiate any kind of fraud or collusion or any willful mis-statement or suppression of facts or contravention of any provisions of laws concerning Central Excise and/or Service Tax with an intention to evade payment of duty on the part of the appellant for recovery of any short levy or short payment of duty for the period of five years from the relevant date. Here, the Show-cause notice has been issued on 17.8.2012. Therefore, any demand for the period prior to July 2011 is clearly barred by limitation as per the provisions of Section 11A(4) of Central Excise Act, 1944. Consequently, it is held that the Revenue can recover the demand only for the normal period of one year from the relevant date. During this normal period of one year, the demand would be restricted to reversal of the proportionate credit of input services. Decided partly in favor of assessee.

Summary

Issues Involved:
1. Demand of ?13,78,91,547/- for the period up to March 2008.
2. Demand of ?35,88,72,223/- for the period from April 2008 to June 2012.
3. Demand of ?4,25,000/- for the clearances in November 2007 and August 2009.

Detailed Analysis:

Issue 1: Demand of ?13,78,91,547/- for the period up to March 2008
The Commissioner held that the appellant was required to pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in the manufacture of goods cleared under Notification No. 63/95-CE. The appellant argued that they had reversed ?1,03,82,529/- towards proportionate credit and that Rule 6(3)(b), which requires payment of 10% of the price of exempted goods, was not applicable. The appellant contended that the demand should be restricted to proportionate credit on input services and was barred by limitation.

The Tribunal found that the demand could theoretically be restricted to the proportionate credit on input services. However, the demand was issued more than four years after the relevant period, and the Revenue failed to prove any fraud, collusion, or willful misstatement. Consequently, the demand was set aside as time-barred.

Issue 2: Demand of ?35,88,72,223/- for the period from April 2008 to June 2012
The appellant argued that they had reversed ?4,15,12,424/- towards proportionate credit and exercised the option under Rule 6(3)(ii). They contended that the demand should be limited to the proportionate credit on input services and that the demand for the period prior to July 2011 was barred by limitation.

The Tribunal found that the appellant needed to provide clear proof of reversal of Cenvat credit on input services. The demand for the period prior to July 2011 was barred by limitation, as the Revenue failed to prove any fraud or willful misstatement. Consequently, the demand was restricted to the normal period of one year from the relevant date, and the appellant was entitled to claim the benefit of reversal of Cenvat credit taken on inputs if proven.

Issue 3: Demand of ?4,25,000/- for the clearances in November 2007 and August 2009
The Revenue argued that the appellant did not produce documents showing proportionate credit or reversal of the amount equal to the credit availed on input services. The appellant contended that the demand should be restricted to the proportionate credit on input services and was barred by limitation.

The Tribunal found that the demand was for a period beyond the normal period of one year and was barred by limitation. There was no evidence of fraud or willful misstatement by the appellant. Consequently, the demand was set aside.

Conclusion:
The Tribunal set aside the demand of ?13,78,91,547/- as time-barred. The demand of ?35,88,72,223/- was restricted to the normal period of one year from the relevant date, with the appellant entitled to claim the benefit of reversal of Cenvat credit on inputs if proven. The demand of ?4,25,000/- was set aside as time-barred. The matter was remanded to the Commissioner for re-quantification of the liability of the demand, interest, and penalty.