2017 (4) TMI 1020 - AT - Central Excise

CENVAT credit - case of Revenue is that the appellant availed irregular CENVAT credit of inputs and input services used in the manufacture of pegfilgrastim, an exempted product cleared during the period March, 2011 to December, 2012 - Held that - it is proved that even after entertaining reasonable doubt as to the dutiable nature of the products, they continued to pay duty and avail credit till December, 2012. They have stopped payment of duty only from January 2013. It has taken another 8 months for the department to wake up from their peaceful slumber and issue a letter calling for the details of the credit availed. The department has no case that the appellants did not furnish details when required for - appellant cannot be saddled with allegation of suppression of facts with intend to evade payment of duty. Therefore, the SCN issued invoking the extended period of limitation cannot sustain - the penalty also cannot be imposed for the reason that the appellant had paid the duty on the genuine belief that the product is dutiable - some part of the period covered in the SCN lies within the normal period, for which demand is sustained. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Availing irregular CENVAT credit on exempted product.
2. Extended period of limitation for demanding payment.
3. Allegation of suppression of facts by the appellant.
4. Imposition of penalty and interest on irregularly availed credit.

Issue 1: The appellant was engaged in manufacturing pharmaceutical products, including an exempted product called Pegfilgrastim. Initially, the appellant paid duty on Pegfilgrastim from March 2011 to December 2012. Subsequently, upon realizing that Pegfilgrastim was exempt from duty, they stopped payment from January 2013 onwards. The appellant availed CENVAT credit on inputs during this period. However, a show cause notice was issued alleging irregular CENVAT credit availed on the exempted product. The lower authorities disallowed the credit, demanding payment along with interest and imposing a penalty, which was upheld by the Commissioner (Appeals).

Issue 2: The appellant contended that they sought clarification from the department regarding the duty liability on Pegfilgrastim through letters dated 5.9.2012 and 16.11.2012. Despite these communications, the department did not respond until August 2013, when they sought information on the availed credit. The department then issued a show cause notice in September 2013 invoking the extended period of limitation due to alleged suppression of facts by the appellant.

Issue 3: The appellant argued that they cooperated with the department by disclosing the availed credit in their returns and seeking clarification on duty liability. The appellant maintained that they paid duty on Pegfilgrastim based on a genuine belief that it was dutiable. The appellant's contention was that the show cause notice invoking the extended period of limitation was not sustainable as they were not attempting to evade duty payment.

Issue 4: The tribunal analyzed the facts and concluded that the appellant had acted in good faith by paying duty on Pegfilgrastim until they realized its exempt status. The tribunal found no suppression of facts by the appellant to evade duty payment. Therefore, the show cause notice invoking the extended period of limitation was deemed unsustainable. The tribunal upheld the demand for the normal period but set aside the penalty and demand for the period beyond the normal period, considering the situation as revenue neutral. The interest for the normal period was maintained, and the appeal was partly allowed in favor of the appellant.