2022 (11) TMI 148 - AT - Central Excise

Utilization of Cenvat Credit of basic Excise Duty for discharge of E Cess and SHE Cess - suppression of facts or not - Extended period of limitation - HELD THAT - There can be no doubt that the purported demands against the appellant could have been confirmed only if the invocation of extended period of limitation was proven to be legal and justified. Upon perusal of the show cause notice dated 19.02.2015 it is clear that no allegation had been framed that the appellant had suppressed material facts from the Department or that the appellant had committed any specific default warranting invocation of the extended period of limitation. Thus, the appellant was never put to notice as to which of the various acts or omissions mentioned in the proviso to Section 11A(1) of the Act had been committed by it - thus, the invocation of extended period of limitation was totally contrary to law. The assessee could not have been faulted for its conduct, even if it were to be held that cross utilization of basic Excise Duty credit for payment of E Cess and SHE Cess was prohibited under the Rules. In the case of M/s Madura Industrial Textiles, 2013 (1) TMI 352 - GUJARAT HIGH COURT , the Hon ble Gujarat High Court had considered the issue and ruled in favour of the assessee. The evidences on record do not show that the appellant had acted otherwise than in a bona fide manner. It is not disputed that the details regarding availment and utilization of the disputed credit had been disclosed in the appellant s Central Excise returns filed with the Department. The issue of purported illegal utilization of credit had come to the Department s knowledge as far back as in the year 2013 while conducting audit - there are no reason to sustain the invocation of extended period of limitation against the appellant. It is held that the purported disallowance of Cenvat Credit of Rs. 9,08,676/- against the appellant is illegal and unjustified. The confirmation of interest and equivalent penalty under Section 11AB/AA of the Act and Rule 15 of the Rules respectively is also held as unsustainable - Appeal is disposed of on the point of limitation.

Summary

Issues:
- Disallowance of Cenvat Credit of Rs. 9,08,676 for the period 2011-12 and 2012-13
- Interpretation of Rules regarding utilization of basic Central Excise duty credit for payment of E Cess and SHE Cess
- Invocation of extended period of limitation for the show cause notice

Analysis:
1. Disallowance of Cenvat Credit: The appellant, engaged in manufacturing writing and printing paper, availed Cenvat Credit for inputs. An audit alleged wrongful utilization of Cenvat Credit towards E Cess and SHE Cess, leading to contravention of Rules. The appellant contested the audit objection, arguing no bar under the Rules for such utilization. The show cause notice proposed recovery of the credit, interest, and penalty. The Order-In-Original confirmed the demands, upheld by the Commissioner (Appeals). The appellant contended that basic Excise duty credit could be used for E Cess and SHE Cess, supported by interpretations of relevant Acts and case laws.

2. Interpretation of Rules: The appellant argued that Rule 3 did not prohibit using basic Excise duty credit for E Cess and SHE Cess. They cited provisions supporting their stance and distinguished a previous decision. The appellant also challenged the invocation of extended period of limitation, emphasizing the lack of specific allegations in the show cause notice. They referenced legal precedents emphasizing the need for clear allegations for invoking extended limitation. The Tribunal agreed that the issue was interpretational and ruled in favor of the appellant.

3. Invocation of Extended Period of Limitation: The Tribunal found that the show cause notice lacked specific allegations of suppression or default, essential for invoking extended limitation. The appellant's conduct was considered bona fide, as details of credit utilization were disclosed in their returns. The delayed issuance of the show cause notice, coupled with the failure to address the limitation issue properly by the Commissioner (Appeals), led the Tribunal to hold the invocation of extended limitation as unjustified. Consequently, the disallowance of Cenvat Credit, interest, and penalty were deemed illegal and unsustainable.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned Order-In-Appeal dated 28.12.2017, based on the point of limitation. The Tribunal found the disallowance of Cenvat Credit unjustified, along with the confirmation of interest and penalty, and provided consequential reliefs to the appellant.