2019 (4) TMI 1000 - HC - Central Excise

CENVAT Credit - capital goods used exclusively in manufacture of exempted goods - Area based exemption availed by the appellant - Rule 6(4) of the Cenvat Credit Rules - extended period of Limitation - HELD THAT - The assessee did not declare all the particulars to the department on the ground that, since the exemption notification was inapplicable on the date of receipt of the goods by the assessee, they were entitled to claim the benefit of Cenvat credit - The bonafide belief of the assessee, that they were not liable to pay duty, would not, by itself and without anything more, amount to fraud or collusion or wilful mis-statement or suppression of facts or contravention of the provisions of the Act or the Rules with intention to evade payment of duty. The extended period of limitation would apply only to cases where the adjudicating authority has put the assessee on notice of its falling within any one of the clauses (a) to (e) of Section 11A(4) - In the present case that was not done and, consequently, the extended period of limitation is not available to assess the assessee to excise duty. The order-in-original, passed by the adjudicating authority, was beyond the period of limitation. Appeal dismissed - decided against Revenue.

Issues:
1. Admissibility of cenvat credit on capital goods used in fabrication of machinery.
2. Time limitation for issuance of show cause notice.
3. Application of Rule 6(4) of the Cenvat Credit Rules, 2004.
4. Imposition of penalties under Rule 15(1) and Rule 15(2) of the Cenvat Credit Rules, 2004.
5. Interpretation of Section 11A of the Central Excise Act regarding recovery of duties.
6. Determination of extended period of limitation for recovery of duties.
7. Whether the assessee's actions amounted to fraud, collusion, wilful mis-statement, suppression of facts, or contravention of provisions with intent to evade payment of duty.
8. Applicability of the extended period of limitation under Section 11A(4) of the Central Excise Act.
9. Entitlement to claim the benefit of Cenvat credit under the exemption notification.

Analysis:

1. The appeal was filed against the order of the Customs, Excise and Service Tax Appellate Tribunal, where the assessee availed cenvat credit on capital goods used in machinery fabrication. The assessee contended that the admissibility of cenvat credit should be based on the date of receipt of goods, and the demand show-cause notice was time-barred. The Tribunal observed that Rule 6(4) did not permit credit on capital goods for exempted goods, and the show cause notice issued after two and a half years of audit was invalid.

2. The show-cause notice was confirmed, imposing a demand, interest, and penalties under Rule 15(1) and Rule 15(2) of the Cenvat Credit Rules, 2004. The Tribunal held in favor of the assessee, citing precedents and noting that the issues raised were covered by previous orders. It also found the show cause notice bad for invoking the extended period of limitation.

3. Section 11A of the Central Excise Act deals with recovery of duties not levied or paid, with a five-year limitation in cases of fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions. The show-cause notice did not specify any contravention under Section 11A(4). The Tribunal held that the extended period of limitation did not apply as the assessee's actions did not constitute evasion.

4. The Tribunal emphasized that the assessee's belief of not owing duty did not amount to fraud or suppression of facts. The extended period of limitation is applicable only when the authority notifies the assessee of falling within the specified clauses of Section 11A(4), which was not done in this case. Therefore, the order-in-original was beyond the limitation period.

5. Interference in appeals under Section 35G is permitted only if substantial questions of law arise. The Tribunal found no substantial questions of law in the order under appeal, leading to the dismissal of the appeal. The judgment highlighted the importance of adherence to legal provisions and limitations in excise duty matters.

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