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2020 (12) TMI 875 - AT - Central ExciseExcess availment of CENVAT credit - whether the appellant had taken excess CENVAT credit as arrived by the department holding that it was paper transaction without or short receipt of raw materials? - Extended period of limitation - HELD THAT - The value so arrived was compared with the value of raw material consumed as shown in the Balance Sheet of respective financial year. ER-1 return shows the amount of CENVAT credit taken on the quantity of raw material purchased and not on the quantity of raw material consumed. There is no provision for one to one correlation in CENVAT credit scheme - there is no other evidence on record like investigation from supplier of raw material transporter or evidence of cash flow back or any inculpatory statement to substantiate that excess CENVAT credit taken was based on paper transaction i.e. without or short receipt of raw material against invoices. There is also no reference to any statutory provisions to justify/ support the said computation of excess CENVAT credit demanded in the instant case. Therefore the entire demand of excess CENVAT credit in the absence of any corroborative evidence is nothing but based on presumptions and is not permissible under the law. The Tribunal in the case of BEER BROS. VERSUS COMMISSIONER OF CENTRAL EXCISE NEW DELHI-I 2015 (9) TMI 1439 - CESTAT NEW DELHI held that charge of excess cenvat credit on the strength of balance sheet only is not sustainable. Extended period of limitation - HELD THAT - In the present case the entire demand is based on the audit objection and is alleged to have been detected only after the audit was conducted - The allegation of suppressing the facts from the department does not hold good in the event of periodic audit of the appellant as above. There is no other evidence in the impugned order to show that the appellant has willfully suppressed the facts from the department in order to evade payment of duty. As such extended period of limitation cannot be invoked in the present case. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the appellant had taken excess CENVAT credit based on paper transactions without or short receipt of raw materials. 2. Whether the extended period of limitation can be invoked under the circumstances and facts on record. Issue-Wise Detailed Analysis: 1. Excess CENVAT Credit: The department alleged that the appellant had availed excess CENVAT credit by showing escalated values of raw material in their ER-1 returns compared to their balance sheet, resulting in an irregular and inadmissible credit. The audit conducted for the period 2013-14 revealed a discrepancy between the purchase value of raw materials in the balance sheet and the ER-1 returns, leading to the conclusion that the appellant availed excess CENVAT credit amounting to ?2,29,94,207/-. Similar discrepancies were noted for the years 2012-13, 2014-15, 2015-16, and 2016-17, leading to a total alleged excess CENVAT credit of ?4,94,94,638/- over these years. The appellant contested the demand, arguing that the department's calculation method was flawed. The department used a formula to compute the raw material value from the total CENVAT credit shown in ER-1 returns, which was then compared with the balance sheet figures. The appellant argued that ER-1 returns show CENVAT credit taken on the receipt of inputs, not on the quantity consumed, and that there is no statutory provision for such a method of calculation. They also highlighted that various factors, such as quantity discounts and different duty rates on different inputs, were not considered by the department. The tribunal found that the method used by the department to determine excess CENVAT credit was not provided under the statute and lacked corroborative evidence. There was no investigation from suppliers or transporters, no evidence of cash flow back, or any inculpatory statements to substantiate the claim of excess CENVAT credit based on paper transactions. The tribunal cited the case of Beer Bros. Vs. Commissioner of Central Excise, New Delhi, where it was held that the charge of excess CENVAT credit based on balance sheet figures alone is not sustainable. Consequently, the tribunal concluded that the entire demand was based on presumptions and not permissible under the law. 2. Extended Period of Limitation: The department invoked the extended period of limitation under Section 11A of the Central Excise Act, 1944, alleging that the appellant had suppressed material facts with the intent to evade payment of duty. The appellant argued that they were regularly audited by the department and the AG, West Bengal, and there was no evidence of willful suppression of facts. The tribunal noted that the appellant was duly registered and there was no allegation of non-submission of periodical returns. The periodic audits conducted by the department further weakened the allegation of suppression of facts. The tribunal found that the conditions for invoking the extended period of limitation, such as fraud, collusion, willful misstatement, or suppression of facts, were not met in this case. The entire demand was based on audit objections detected during regular audits, and there was no evidence to show that the appellant willfully suppressed facts to evade duty. The tribunal relied on case laws such as Collector of Central Excise Vs. Malleable Iron & Steel Casting Co. Pvt. Ltd. and Collector of Central Excise Vs. H.M.M. Ltd., which supported the appellant's contention. Conclusion: The tribunal set aside the impugned order, finding that the demand of excess CENVAT credit was based on flawed calculations and presumptions without corroborative evidence. The extended period of limitation was also not applicable as there was no willful suppression of facts. The appeal filed by the appellant was allowed with consequential relief.
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