2016 (11) TMI 476 - AT - Central Excise

Repayment of Cenvat credit utilised in contravention of Rules 3 and 4 of the Cenvat Credit Rules, 2004 - credits have been used for making payments for the finished products which have not been manufactured in the assessee s factory - job work - Held that - the assessee has admittedly got the goods manufactured on job work basis in its sister concern in terms of Notification No.214/86-CE. As per the definition in 2(f) of the Central Excise Act, 1994, the term manufacturer will include any person who gets goods manufactured outside factory. On this ground also the demand for reversal of Cenvat credit is not justified. Limitation bar - Held that - the demand has been raised by mechanically invoking the proviso to Section 11A of the Act. I find no discussion or even a murmur of any evidence or allegation that the respondent has indulged in the act of suppression of facts or wilful mis-statement, contravention to the provision of the said Rule. In the absence of any of the ingredients, there can be no justification to invoke the extended period of time for issuing demand. Respondent has relied on many case laws including the decision of the Hon ble Supreme Court in the case of CCE Vs. Chemphar Drugs & Liniments 1989 (2) TMI 116 - SUPREME COURT OF INDIA . In the said decision Hon ble Supreme Court categorically held that conscious or deliberate withholding of information by manufacturer is necessary to invoke larger limitation of five years. In the present case, the Department has acquired full knowledge about the facts of the case at the time of visit of the factory by the officers on 17.03.2006. Consequently, the Show Cause Notice, if any, ought to have been issued within a period of one year from that date. The Show Cause Notice stands issued on 09.03.2009. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Utilization of cenvat credit after the sale of factory.
2. Demand under Section 11D of the Central Excise Act, 1944.
3. Demand under Rule 14 of the Cenvat Credit Rules.
4. Penalty imposition under Rule 26 of the Cenvat Credit Rules.
5. Applicability of job work basis for manufacturing.
6. Time limitation for issuing the Show Cause Notice.

Utilization of Cenvat Credit after the Sale of Factory:
The appellant, a manufacturer of corrugated boxes, continued to use cenvat credit post the sale of the factory until the registration surrender date. The Department alleged misuse of cenvat credit, leading to demands under Section 11D and Rule 14 of the Cenvat Credit Rules. The appellant argued that they were entitled to use the credit until registration surrender, citing job work provisions.

Demand under Section 11D of the Central Excise Act, 1944:
The Department demanded recovery under Section 11D for excise duty paid using cenvat credit post-factory sale. The appellant contended that duty payment was valid as per job work arrangements, supported by the continued registration until surrender.

Demand under Rule 14 of the Cenvat Credit Rules:
A demand was made under Rule 14 for alleged contravention of Cenvat Credit Rules. The appellant defended the credit usage, emphasizing compliance with job work norms and absence of evidence of inappropriate credit utilization.

Penalty Imposition under Rule 26 of the Cenvat Credit Rules:
Penalties were proposed under Rule 26 on the Director of the appellant factory. The appellant challenged the penalties, highlighting adherence to job work regulations and lack of evidence supporting penalty imposition.

Applicability of Job Work Basis for Manufacturing:
The appellant argued for the legitimacy of using cenvat credit for duty payment on goods manufactured through job work. They cited Notification No.214/86-CE and judicial precedents supporting their position.

Time Limitation for Issuing the Show Cause Notice:
The appellant contended that the Show Cause Notice issued in 2009 for the period 2005-06 was time-barred. They argued that no grounds for invoking an extended time limit were specified, rendering the demand time-barred based on the visit date and notice issuance.

In the judgment, the Tribunal acknowledged the appellant's entitlement to use cenvat credit until factory registration surrender. The Department's demands under Section 11D and Rule 14 were refuted, emphasizing compliance with job work provisions. The Tribunal overturned the lower authorities' decisions, ruling in favor of the appellant and Director, citing job work legitimacy, absence of evidence of credit misuse, and the time-barred nature of the demand based on the Show Cause Notice issuance date.