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2019 (7) TMI 780 - AT - Central ExciseShort payment of Excise Duty - removal of the alleged capital goods, as waste and scrap - Rule 3(5A) of Credit Rules - restrospective application of the rule by way of issuance of notification - It is the contention of the Department that during the relevant period Rule 3(5A) of Credit Rules has been amended by issue of Notification 03/2013-CE NT dated 1/03/2013, which was further amended by Notification dated 27/09/2013 which restored the previous position as prevalent under Rule of 1994, and erstwhile Credit Rules - HELD THAT - The perusal of the history Rule 3(5A) indicates that barring the period 17/03/2012 to 26/09/2013, the provision existed for reversal of credit on the transaction value. As the amendment was made to mitigate the hardships caused to the trade, this is a beneficial piece of legislation and thus required to given the retrospective effect. Further, the issue involved interpretation of provisions of Rule 3(5A), and therefore, the Ministry has to clarify the issue subsequently by issuance of amended notification - there were a widespread confusions in the trade regarding modality to be adopted for the reversal of the credit. Even if it is assumed that the appellant has removed capital goods, although the same is being contested. There has been evidence of series of communication regarding on the issue of reversal of Cenvat Credit between, the department and the appellant as it is evident from the various communications exchanged between them which is manifested from the letters dated 23.09.2013, 22.01.2014, 12.02.2014, 19.05.2014, 09.12.2014, 29.12.2014, 06.02.2015, 09.04.2015, 11.05.2015. 09.10.2015 and 20.11.2015 - the extended period of limitation for raising the demand is not available with the department. The impugned order is not sustainable both on merits and limitation - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Alleged short payment of Central Excise duty under Rule 3(5A) of Cenvat Credit Rules, 2004. 2. Classification of goods as capital goods or inputs. 3. Applicability of Rule 3(5A) for the period 17/03/2012 to 26/09/2013. 4. Extended period of limitation for raising the demand. 5. Quantification of demand. 6. Evidence of communication between the appellant and the department. Detailed Analysis: 1. Alleged Short Payment of Central Excise Duty: The primary issue in the appeal was the alleged short payment of Central Excise duty on the removal of used capital goods as waste and scrap. The original adjudicating authority confirmed a demand of ?94,71,347/- for the period from 01/04/2012 to 26/09/2013, along with recovery of interest and imposition of a penalty under Section 11AC of the Central Excise Act, 1944. 2. Classification of Goods as Capital Goods or Inputs: The appellant contended that the goods in question were inputs and consumables, not capital goods. They provided a detailed list of scrap materials, such as fire bricks, steel casting, grinding media, conveyor belts, and MS steel, arguing these were used for purposes other than plant and machinery. They supported their claim with purchase invoices and previous communications with the department. The appellant cited several judicial decisions to support their position that duty was not payable under Rule 3(5A) for these items. 3. Applicability of Rule 3(5A) for the Period 17/03/2012 to 26/09/2013: The appellant argued that Rule 3(5A) was amended on 17/03/2012 to require payment equal to the Cenvat Credit taken, reduced by a straight-line method. However, this rule was again amended on 27/09/2013 to revert to the previous position of payment based on transaction value. The appellant contended that the amendment should be applied retrospectively, as it was a beneficial piece of legislation intended to mitigate hardships. The tribunal agreed with this interpretation, citing precedents like Indian Tobacco Association and Adani Power Ltd. 4. Extended Period of Limitation for Raising the Demand: The appellant argued that the extended period of limitation was not applicable as the department was aware of their practices since March 2013, and the demand was issued only on 24/04/2017. The tribunal found merit in this argument, noting that the issue arose from an audit and there was no suppression or misrepresentation by the appellant. The tribunal cited several judicial decisions, including ZYG Pharma Pvt. Ltd. and Dynamic Industries Ltd., to support the view that the extended period of limitation was not invocable. 5. Quantification of Demand: The appellant challenged the quantification of the demand, arguing that the rate of duty was incorrectly applied based on assumptions rather than actual purchase prices. They also pointed out discrepancies in the classification of fire bricks. The tribunal did not delve deeply into this issue, as the appeal was allowed on other grounds. 6. Evidence of Communication: The tribunal noted that there was a series of communications between the appellant and the department regarding the reversal of Cenvat Credit. This included letters exchanged over several years, indicating ongoing discussions and clarifications sought by the appellant. Conclusion: The tribunal set aside the impugned order, finding it unsustainable both on merits and limitation grounds. The appeal was allowed with consequential benefits as per law.
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