2016 (9) TMI 783 - AT - Central Excise

Invokation of extended period of limitation - sustained by the Commissioner - appellant had admitted before the Commissioner that the items were not at all its inputs but on record the same were declared as inputs - mala fide intention when took the credit - products in question and impugned items were both exported under Bond - Held that - the order of the Tribunal dated 4.10.2002 clearly records that the claim of the appellant that they took the stand that they did in the reply to the notice as a result of coercion of the departmental authorities is patently absurd. The said order also records that it is impossible to believe that the appellant s reply was drafted by an advocate and dictated by any officer of the department. It is found that the defence of the appellant is largely based on the fact that there was no revenue loss as the goods were exported and the fact that even if the credit was taken on spares it was possible to export the same and avail refund of the duty paid in terms of Rule 57F of the Modvat Credit Rules. It can be seen that in the scheme of the Modvat there is an intention to neutralize the tax suffered on the inputs cleared as such for export. Thus with respect to goods exported by the appellant it can be stated that the intention of the Government was to allow the credit of such inputs. Moreover the export sealing of these goods was done by Revenue and therefore they cannot say that they were not aware of it. Thus suppression cannot be alleged in these circumstances. Therefore the extended period cannot be invoked in these circumstances. - Decided in favour of appellant

Summary

Issues:
1. Denial of modvat credit on various items exported without reversing credit.
2. Denial of credit on a compressor and shrink wrapping machine.
3. Denial of credit on spares for machines exported but not utilized.
4. Imposition of penalty for wrongly taken credit.

Analysis:
1. The Tribunal previously decided the denial of modvat credit issue. The appellant claimed coercion by the department, but the Tribunal found the denial justified as the items were not inputs. The denial was upheld as the appellant's reply admitted the error, and the reversal of credit was necessary.

2. Regarding the compressor and shrink wrapping machine, the Tribunal accepted the compressor as integral to the glass forming machinery but rejected the shrink wrapping machine's inclusion, as it was not a component of the machinery. Hence, credit denial was upheld for the shrink wrapping machine.

3. The issue of spares for machines not exported was addressed. The appellant's obligation to supply spares was acknowledged, but since the export did not occur, the reversal of credit on the spares was deemed appropriate.

4. A penalty was imposed for wrongly taken credit. The Tribunal reduced the penalty, considering the circumstances. The appellant's delay in reversing credit and lack of explanation for the oversight led to the penalty imposition, which was later reduced.

5. The issue of extended period invocation was raised. The Commissioner upheld the extended period based on the appellant's admission of non-input status for certain items. However, the appellant argued for revenue neutrality due to export possibilities and cited relevant circulars. The Tribunal found the extended period invocation unjustified due to the export nature of the goods and the intent of the Modvat scheme to neutralize tax on exported inputs. The suppression charge was refuted based on these grounds.

6. Ultimately, the Tribunal ruled in favor of the appellant, stating that the extended period could not be invoked in the circumstances presented, emphasizing the intent of the Modvat scheme for exported inputs and the lack of suppression due to the Revenue's involvement in export sealing.

This comprehensive analysis covers the key issues and rulings in the legal judgment.