2024 (4) TMI 816 - AT - Central Excise

CENVAT Credit - common input services used for the exempted goods, namely electricity cleared from the manufactory of the Appellant - CENVAT Credit availed on common input services used for exempted services alleged to be Trading of goods, but claimed to have cleared inputs as such - Extended period of limitation - Interest - penalty. Whether the computation of demand of the amount of Rs.97,01,260/- on account of CENVAT Credit availed on common input services used for the exempted goods, namely electricity cleared from the manufactory of the Appellant is correct? - HELD THAT - The Appellant in this case has been paying the amount of CENVAT Credit as was arrived by them by application of the formula prescribed under Rule 6 (3A) of the CENVAT Credit Rules in terms of the option exercised by them - the appellant has never submitted data of the electricity duly certified by the Chartered Accountant despite having many opportunities, which finds mention in the findings of the adjudicating authority. However, the issue whether the figures taken by the Department standalone Balance-sheet pertaining to Godawari Power and Ispat Ltd, do not require verification at the original stage. In view of the emphatic submissions made, this matter requires reconsideration at the original stage and needs to be remanded. Whether the demand of the amount of Rs 83,62,788/- on account of CENVAT Credit availed on common input services used for exempted services alleged to be Trading of goods, but claimed to have cleared inputs as such is correct? - HELD THAT - The profit earned out of such clearances, alleged to be trading, and common use of the input services has not been controverted in any manner by the ld. Counsel of the appellant. Therefore, these are triggers to decide this issue as to whether the clearances by earn of substantial profit would remain within the ambit of inputs cleared as such under Rule 3(5) or would it be tantamount to the trading of the goods , besides use of common input services. The appellant has reversed the Cenvat Credit on these goods which they had traded. In view of the said factual position, it is directed that the amount so reversed is liable to be appropriated against the demand. Accordingly this matter remanded to the original authority to recalculate the differential demand taking due note of the CENVAT credit which is already reversed. Whether the aforesaid demands are correct and justified in involving the extended period of limitation? - suppression of facts or not - HELD THAT - It is settled principle in law that existence of ingredients leading to invocation of extended period of limitation is a question of the fact and the facts of the case in hand will determine whether the extended period of limitation could have been invoked, unlike the question of law where the determination can be made on the basis of the available judicial precedents - the appellant succeeded in suppressing critical information from scrutiny. Hence the extended period is rightly invokable in the case. Penalty - HELD THAT - Since it is established, that appellant had suppressed the material facts and misstated with intent to evade payment of amount of Cenvat credit, the penalty under Section 11AC shall be natural consequence as has been held by Hon ble Supreme Court in case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT . The Apex court held the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. Interest liability for delayed payment of amount of CENVAT credit - HELD THAT - The interest liability for delayed payment of amount of CENVAT credit also cannot be disputed. Appellant has not paid the amount, payable by them as per admitted position under Rule 6 (3A) on the exempted goods cleared by them by the due date and hence demand of interest on the delayed payment is justified. The appeal is allowed partially and also by way of remand.

Summary

Issues Involved:
1. Computation of demand of CENVAT Credit on common input services used for exempted goods (electricity).
2. Demand of CENVAT Credit on common input services used for exempted services (trading of goods).
3. Invocation of extended period of limitation.

Summary:

Issue 1: Computation of demand of CENVAT Credit on common input services used for exempted goods (electricity):

The tribunal noted that the appellant exercised the option to pay an amount in lieu of CENVAT Credit u/s 6(3A) of the CENVAT Credit Rules due to the use of common inputs for dutiable and exempted goods. The appellant argued that the computation by the department included the value of electricity cleared by other units, not just the Siltara unit. The tribunal observed that the appellant failed to provide a Chartered Accountant's certificate to prove the figures were consolidated. The tribunal remanded the issue to the original authority to verify the figures and allow the appellant to submit necessary documentation.

Issue 2: Demand of CENVAT Credit on common input services used for exempted services (trading of goods):

The tribunal examined whether the clearances of goods by the appellant amounted to trading or were clearances of inputs as such. The tribunal concluded that the clearances earned substantial profit and used common input services, thus amounting to trading of goods, an exempted service. The tribunal upheld the demand but directed the original authority to recalculate the differential duty, considering the CENVAT credit already reversed by the appellant.

Issue 3: Invocation of extended period of limitation:

The tribunal upheld the invocation of the extended period of limitation, noting that the appellant suppressed critical information and misdeclared facts to evade payment. The tribunal referenced several judicial precedents to support this conclusion. The tribunal also upheld the imposition of penalties and interest, directing the original authority to re-quantify the demand and penalties proportionately based on the revised calculations.

Conclusion:

The tribunal partially upheld the impugned order, remanding the issues for re-quantification and verification of figures, and upheld the invocation of the extended period of limitation, penalties, and interest.