2019 (8) TMI 673 - AT - Central Excise

CENVAT Credit - difference in the CENVAT credit figures in the two returns filed by the assessee i.e., monthly ER-1 returns vis-a-vis the annual ER-4 return - time limitation - HELD THAT - I have perused the ER-4 returns where the alphabet E with decimals have appeared at multiple places which can only be attributed to the system error, a fact not controverted by the Revenue and therefore, no negative inference can be drawn against the assessee merely based on the data contained in ER-4 return. I also find that Ld. Commissioner has made a categorical finding that the assessee has duly submitted the CENVAT Credit Register at the adjudication stage which corresponds to the ER- 1 return and therefore, the Credit figures disclosed in the said ER-1 return have to be accepted as sacrosanct without any demur. There is no reason to saddle the assessee with the demand of CENVAT Credit, as has been rightly held by the Ld. Commissioner in the impugned order by setting aside the duty demand. Whether the matter should be remanded back to the original authority? - HELD THAT - Since the Ld. Commissioner is satisfied on both the counts (i) that there was a system error based on which he has set aside the duty demand and (ii) that the assessee had submitted the Credit Register at the adjudication stage which corresponds to the credit figure shown on ER-1 returns, there is no reason to remand the matter as no purpose would be further served in the given facts of the case - In any case, the whole proceeding is hit by limitation inasmuch as the Show Cause Notice in the present case was issued on 16.10.2014 for the impugned period 2010-11. Since the proceedings have been initiated on the basis of statutory returns, this is not a case of suppression and therefore demand cannot survive on limitation also. Appeal allowed in part.

Summary

Issues:
Appeal against Order-in-Appeal setting aside central excise duty demand due to denial of CENVAT Credit.
Remand of the matter to original authority for verification purpose.
Cross objection filed by the assessee in the departmental appeal.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal dated 23.04.2018, where the demand of central excise duty amounting to ?27,51,403/- was set aside by the Ld. Commissioner, CGST & Central Excise, Kolkata North, due to denial of CENVAT Credit. The Ld. Commissioner remanded the matter to the original authority for verification. The assessee, M/s Tide Water Oil Co. (India) Ltd., filed a cross objection in the departmental appeal. The dispute arose from discrepancies in the CENVAT credit figures in the monthly ER-1 returns and the annual ER-4 return filed by the assessee for the period 2010-11. The Ld. Commissioner observed a system error in the ER-4 return, which had erroneous entries due to which no negative inference could be drawn against the assessee. The Ld. Commissioner accepted the CENVAT Credit Register submitted by the assessee, which corresponded to the ER-1 return, and held the credit figures disclosed in ER-1 as sacrosanct. The Tribunal concurred with the Ld. Commissioner's findings and ruled in favor of the assessee, setting aside the duty demand.

The Revenue contended that the Ld. Commissioner lacked the power under Section 35A of the Central Excise Act to remand the case to the original authority. Additionally, the Revenue argued that no new evidence could be produced by the assessee before the Commissioner in the appeal stage as per Rule 5 of the Central Excise Appeals Rules. However, the Ld. Counsel for the assessee refuted these arguments, stating that the system error in the ER-4 return was evident, and the CENVAT Credit Register and revised ER-4 return were submitted at the adjudication stage. The Ld. Counsel emphasized that the documents were not new evidence and should be considered. The assessee also filed a Cross Objection under Section 35B(4) of the Central Excise Act, disputing the direction for remand by the Ld. Commissioner for comparing CENVAT credit figures in the returns. The Tribunal agreed with the assessee's submissions, highlighting that the demand was barred by limitation, and no suppression was involved since the proceedings were initiated based on statutory returns.

In conclusion, the Tribunal partly allowed the appeal filed by the Revenue and disposed of the Cross Objection filed by the assessee. The Tribunal upheld the Ld. Commissioner's decision to set aside the duty demand, emphasizing the system error in the ER-4 return and the correspondence of CENVAT Credit Register with the ER-1 return. The Tribunal found no reason to remand the matter back to the original authority, considering the limitations and lack of suppression in the case.