2023 (11) TMI 411 - AT - Central Excise

CENVAT Credit - credit taken based on Supplementary Invoice raised by the Dankuni unit - extended period of limitation - suppression of facts or not - HELD THAT - It is observed that the Appellant s Dankuni Unit was issued several Show Cause Notices during the period July 1998 to June 2001. As per the Table contained at Page 12 of the OIO passed in respect of that unit, 16 such Show Cause Notices were issued. On going through this Table, it is seen that in the case of all the 16 Show Cause Notices, they were issued for the normal period only without invoking the provisions of extended period without reference to suppression, mis-statement, etc. Therefore, when the Show Cause Notices have been issued in the normal course for the normal period and there has been no suppression clause brought in, the provisions of Rule 7(1)(b) of CCR 2004, would not be applicable. Therefore, the confirmed demand is required to be set aside on this account alone. Further, it has been held in catena of decisions, it has been held that only when any demand stands confirmed on account of fraud, suppression or willful misstatement, etc. only after having attained finality, the Cenvat Credit will not be eligible when such duty element is passed on by way of supplementary invoices. In the present case, against the proceedings initiated against the Dankuni Plant, the confirmed demands (in fact only for the normal period) are being contested by the Appellant at the Tribunal level. Therefore, the confirmed demand at the lower level cannot be said to have attained finality. Even on this account, the allegations contained in the present proceedings are not found to be legally sustainable. Hence the provisions of Rule 7(1)(b) of the Cenvat Credit Rules are not applicable. Appeal allowed.

Summary

Issues Involved:
The issue involves the eligibility of the Appellant to claim Cenvat Credit based on supplementary invoices raised by their manufacturing facility, the Dankuni unit, after the unit paid Excise duty following a Show Cause Notice demand.

Issue 1: Eligibility of Cenvat Credit based on Supplementary Invoices
The Appellant took Cenvat Credit of Rs.26,98,162 based on the Supplementary Invoice raised by the Dankuni unit. The Show Cause Notice alleged that the Appellant was ineligible to claim this credit as the Excise Duty was paid on account of Excise Duty recoverable from the manufacturer. The demand was confirmed, leading to the Appellant filing an Appeal before the Tribunal.

Issue 2: Applicability of Rule 7(1)(b) of Cenvat Credit Rules
The demand was based on the supplementary Invoices issued by the Dankuni unit for the period October 2001 to March 2002. The Show Cause Notice invoked Rule 7(1)(b) of Cenvat Credit Rules, which deals with situations where additional tax becomes recoverable due to fraud, collusion, misstatement, or contravention of tax laws. However, it was found that the Show Cause Notices issued to the Dankuni unit did not invoke extended period provisions or mention suppression, fraud, or misstatement.

In the judgment, it was noted that the Dankuni unit had been issued several Show Cause Notices from July 1998 to June 2001, but none of these notices invoked the extended period provisions or mentioned suppression. Since the Show Cause Notices were issued for the normal period without any reference to suppression or misstatement, Rule 7(1)(b) of Cenvat Credit Rules was deemed not applicable. Therefore, the confirmed demand was set aside on this basis.

Moreover, the judgment referenced previous decisions stating that Cenvat Credit would be ineligible only if a demand is confirmed due to fraud, suppression, or willful misstatement, and only after finality is reached. Since the confirmed demands against the Dankuni unit were being contested at the Tribunal level and had not attained finality, the allegations were not legally sustainable. Consequently, the provisions of Rule 7(1)(b) of the Cenvat Credit Rules were found not applicable, leading to the Appeal being allowed on the grounds of lack of finality in the alleged suppression by the Dankuni unit.

In conclusion, the Appeal was allowed with consequential relief, if any, as per the law, based on the findings that the confirmed demand against the Appellant was set aside due to the absence of suppression clauses in the Show Cause Notices and the lack of finality in the proceedings against the Dankuni unit.