2017 (4) TMI 270 - HC - Central Excise

Validity of SCN - CESTAT had held that the notice issued to the assessee is beyond the period of limitation and hence has quashed the same - Held that - Section 11A(3) of the CEA, 1944 provides limitation of one year to the Central Excise Officer to issue notice to the assessee. However, sub-section (4) provides that when there is fraud; collusion; any wilful misstatement; suppression of fact and contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, the period of limitation will be five years. The assessee has not withheld any fact; the assessee has not misstated any fact; the assessee has not suppressed any facts. The assessee may have been guilty of claiming wrong Cenvat credit but as pointed out by the CESTAT, there continues to be divergence of opinion with regard to the issue whether Cenvat credit can be claimed on the inputs used for setting up the factory in which goods were manufactured. Therefore, it cannot be said to be a fraudulent claim or a claim which has an aspect of dishonesty attached to it. In this view of the matter, limitation would only be one year. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of limitation period under Section 11A(3) and (4) of the Central Excise Act, 1944 for issuing notice to the assessee.
2. Eligibility of Cenvat credit claimed by the assessee on construction items.
3. Determination of fraudulent intent or suppression of facts by the assessee.

Analysis:
The High Court of Chhattisgarh heard an appeal challenging the orders of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the limitation period for issuing a notice to the assessee. The assessee, a manufacturer of Portland Cement and Cement Clinker, claimed Cenvat credit for the period between March 2006 to June 2009 on various construction projects. The Revenue contended that the assessee claimed credit on items not directly related to Cement and Clinker, leading to the notice being issued in 2012. The dispute revolved around the application of Section 11A(3) and (4) of the Central Excise Act, 1944, which provides for a one-year limitation period, extendable to five years in cases of fraud, collusion, or wilful misstatement.

The CESTAT held that the five-year limitation period was not applicable as the items claimed for credit were not directly related to the manufacturing process of Cement and Clinker. The court noted that the assessee did not suppress any facts or misstate any information, leading to the conclusion that the limitation period should be one year. The court emphasized that the issue of limitation is primarily a question of fact rather than a substantial question of law. Additionally, the court found that the assessee's claim for Cenvat credit, though incorrect, did not involve fraudulent intent or dishonesty, as there was an ongoing debate on the eligibility of such credit for setting up manufacturing facilities.

Ultimately, the High Court upheld the decision of the CESTAT, stating that the assessee did not engage in fraudulent behavior or suppression of facts. The court concluded that the limitation period for issuing the notice should be one year, dismissing the appeal on the grounds that no substantial question of law arose from the case. The judgment highlights the importance of factual analysis in determining the applicability of limitation periods and the absence of fraudulent intent in assessing claims for tax credits.