2018 (3) TMI 92 - AT - Central Excise

CENVAT credit - manufacture of taxable as well as exempt goods - time limitation - Held that - it is surprising to note both the lower authorities has recorded the findings on limitation against the appellant, only on a very flimsy reasoning that the audit party may not have produced all the records - It is tantamount to nothing but reaching a conclusion that the impugned order is incorrect and liable to set aside. Penalty - Held that - the appellant on being pointed by the audit has appropriated since the appellant has reversed on being pointed out by the audit party alongwith interest, no penalty requires to be imposed. Appeal allowed in part.

Summary

Issues:
Reversal of proportionate Cenvat Credit attributable to exempted goods manufactured and cleared by the appellant, Contesting demands on the ground of limitation.

Analysis:
The appeal pertains to the reversal of proportionate Cenvat Credit linked to exempted goods manufactured by the appellant. The appellant, a manufacturer of dutiable Soda Ash and exempted Common Salt, utilized input services for transportation of coal and lignite to the factory premises. An audit revealed that Cenvat Credit was availed on these input services, leading to a demand note for the period 2005-06 to 2011. The appellant reversed a specific amount for the credit linked to common salt production upon identification by the audit party. Subsequently, a show cause notice was issued for recovery of Cenvat Credit and imposition of penalty. The Adjudicating Authority dropped demands for the period up to October 2007 but confirmed demands for the subsequent period. The appellant contested the matter on merit and limitation before the First Appellate Authority, which dismissed the appeal.

The appellant primarily contested the demands for the period October 2007 to December 2009 on the grounds of limitation. The appellant argued that repeated audits of their factory records by the same auditors during this period should have led to the identification of any discrepancies, citing relevant legal precedents. The Departmental Representative, however, contended that the audit party may not have considered all relevant documents during the audit, and both lower authorities failed to address the limitation aspect. Upon careful consideration of submissions and records, the Tribunal found merit in the appellant's limitation argument. Referring to established legal principles from authoritative judgments, the Tribunal held that the demands for the specified period were indeed time-barred. The Tribunal criticized the lower authorities for not properly considering the limitation issue and set aside the impugned order, allowing the appeal.

Regarding the demand for the period October 2007 to December 2009, which the appellant had already reversed upon audit identification, the Tribunal found no grounds for imposing a penalty. Since the appellant had complied upon being alerted by the audit party and reversed the amount with interest, the Tribunal deemed no penalty necessary. Consequently, the impugned order was set aside, and the appeal was allowed. The Tribunal's decision highlighted the importance of correctly addressing limitation issues and following established legal principles in such matters.