2018 (6) TMI 123 - AT - Central Excise

CENVAT credit - denial on the ground that goods cleared clandestinely and cleared under the guise of job-work challan for use of manufacturing goods in unit No.2 - revenue neutrality - Extended period of limitation - Held that - The appellant has cleared the goods under job-work challan to their Unit No.2 during the period 01/08/2004 to 14/04/2007 and unit No.2 has cleared the goods after completion of payment of duty - In that circumstances, it is a revenue neutral situation as the appellant has suffered duty on the said goods cleared by them to Unit No.2 without payment of duty or reversal of Cenvat Credit. Extended period of limitation - Held that - Considering the fact that it being a revenue neutral situation, therefore no malafide can be attributable against the appellant for non-reversal of Cenvat Credit - extended period not invocable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against confirmed demand on account of availing Cenvat Credit, duty demand, and penalty imposition.
- Allegations of clearing raw materials and semi-finished goods under returnable job-work challan.
- Non-reversal of Cenvat Credit and clearance of goods to another unit without payment of duty.
- Lack of necessary permission for removal of cenvatable inputs outside manufacturing premises.
- Show-cause notices proposing recovery of Cenvat Credit/Central Excise duty, interest, and penalties.
- Invocation of extended period of limitation in issuing show-cause notice.
- Revenue neutral situation due to goods cleared under job-work challan to another unit.

Analysis:

1. The appellants contested the demand confirmed on account of availing Cenvat Credit, duty demand, and penalty imposition. The investigation revealed that raw materials and semi-finished goods were cleared under returnable job-work challan without proper entries or reversal of Cenvat Credit. Additionally, goods were clandestinely cleared to another unit without duty payment, violating Rule 16A of the Central Excise Rules, 2002.

2. The Ld. Counsel argued that the goods cleared for job-work to Unit No.2 had duty paid at that unit, creating a revenue-neutral scenario. Citing precedents like Arti Industries Ltd. and Mafatlal Industries Ltd., it was contended that the extended period of limitation was inapplicable due to the absence of malafide intent in clearing goods clandestinely.

3. The Ld. AR maintained the findings of the impugned order, leading to a hearing where both sides presented their arguments. Upon review, it was observed that the appellant had indeed cleared goods under job-work challan to Unit No.2, which subsequently paid the duty, establishing a revenue-neutral situation.

4. The Tribunal referenced the case of Arti Industries Ltd., highlighting a similar revenue-neutral circumstance where duty was paid by the receiving unit. Consequently, the Tribunal held that in such cases, the extended period of limitation could not be invoked, as there was no malafide intent on the part of the appellant.

5. Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned orders based on the revenue-neutral nature of the transactions and the absence of malafide intent. As a result, the appeals were allowed, and the operative part of the judgment was pronounced in court.