2022 (6) TMI 1212 - HC - Central Excise

Extended period of Limitation - suppression of facts or not - details of trading was available in the Balance Sheet of the respondent during the relevant period and that there was much confusion during the relevant period as to whether credit could be availed in respect of trading activities and the issue was in litigation leading to perversity - mere availability of details of trading in Balance Sheet is sufficient to drop the demand for extended period on the ground that there was no suppression, or not - attributing the prior knowledge of trading activity of the respondent ignoring the fact that the respondent produced the Balance Sheet only during the investigation and not prior to that. HELD THAT - Undisputed facts of the case are, as recorded in paragraph 6 of the show cause notice, it was issued based on the balance sheet for the year ending 2008. Thus, the contentions of the Revenue that respondents trading activity was not known to the department and that it was learnt based on intelligence report are not tenable. The substantial questions raised by the Revenue are answered in favour of the assessee - Appeal dismissed.

Summary

Issues:
1. Whether CESTAT was right in dropping the demand for an extended period based on the availability of trading details in the Balance Sheet and confusion regarding credit availing?
2. Whether CESTAT was correct in disregarding factual findings in the Order-In-Original and leading to perversity in the Final Order?
3. Whether the availability of trading details in the Balance Sheet alone is sufficient to drop the demand for an extended period?
4. Whether CESTAT was justified in assuming prior knowledge of trading activity by the respondent?
5. Whether CESTAT was right in setting aside the demand for an extended period and penalties based on previous tribunal decisions, disregarding factual aspects in the present case?

Analysis:
1. The case involved the respondent engaged in manufacturing and trading activities, with a show cause notice issued for wrongful Cenvat credit utilization related to trading. The Chief Commissioner held the credit inadmissible for trading, leading to payment under protest. CESTAT confirmed the demand for the normal period but dropped the extended period demand, citing confusion over credit availment for trading.

2. The appellant argued non-declaration of trading activities and department's unawareness, challenging CESTAT's findings. However, the respondent contended that the balance sheet truthfully declared all activities, negating suppression of facts. Reference to a Madras High Court case emphasized good faith actions of the assessee in similar situations.

3. The High Court noted that the show cause notice was based on the balance sheet, indicating the department's knowledge of trading activities, contrary to the appellant's claim. Citing the Madras High Court decision, the Court upheld that the respondent's belief in availing credit for trading in good faith, despite conflicting tribunal decisions, did not warrant the extended period.

4. Ultimately, the Court ruled in favor of the assessee, emphasizing the clarificatory nature of the government's notification regarding trading activities. The bona fide belief of the assessee and lack of ulterior motives for evading duty led to the dismissal of the appeal, with costs not imposed. The judgment highlighted the importance of good faith actions and legal clarity in tax matters.