2024 (5) TMI 556 - AT - Central Excise

Reversal of CENVAT Credit - common input services used in the manufacture of exempted goods - suppression of facts or not - Extended period of limitation - HELD THAT - The demand for the period prior to May 2006 is barred by limitation as all the facts were in knowledge of Revenue and there is no case of suppression, fraud or mis-statement. So far the reversal on account of common input service is concerned, the same is upheld for the period May 2016 to February 2017. The respondent assessee is directed that they shall file a fresh calculation with the Adjudicating Authority for this period and shall also reverse the amount as per their calculation. The Adjudicating Authority shall examine the calculation and if required call for any further information or explanation. On examination by the Adjudicating Authority, if finds some further amount to be reversed, the appellant if they are in agreement shall reverse the same with the applicable interest as per rules. The appeal is dismissed with the aforementioned directions for re-calculation of the amount reversible under Rule 6(3) towards common input services for the period May 2006 to February 2007.

Summary

Issues Involved:
1. Classification of newsprint in reels.
2. Reversal of Cenvat Credit on inputs and input services.
3. Limitation period for issuing addendums to show cause notices.

Summary:

Classification of Newsprint in Reels:
The respondent, a manufacturer of various paper products, classified newsprint in reels under Chapter Heading 4801, which is exempt from duty. The Department contended that newsprint in reels should be classified under heading 4823, requiring the respondent to pay 10% of the price of the exempted goods. However, the Bangalore bench of the Hon'ble CESTAT and the Hon'ble Supreme Court ruled that newsprint in reels is classifiable under heading 4801. Consequently, the Commissioner dropped the demand of 10% of the sale price of newsprint in reels.

Reversal of Cenvat Credit on Inputs and Input Services:
The respondent reversed the Cenvat Credit attributable to inputs used in the manufacture of exempted goods. The Department appealed, arguing that no reversal was made for certain common input services. The Tribunal found that the first two show cause notices did not allege misuse of input services, but the third notice did. The Tribunal held that the respondent must reverse the proportionate credit attributable to common input services used in the manufacture of exempted goods only for the period from May 2006 to February 2007. The case was remanded for recalculating the amount reversible under Rule 6(3) towards common input services for this period.

Limitation Period for Issuing Addendums:
The Tribunal noted that the addendums to the first two show cause notices were issued beyond the normal limitation period of one year, except for May 2006. Citing decisions in Nizam Sugar Factory Vs CCE and Anglo French Textiles Vs CESTAT, the Tribunal held that the addendums, being in the nature of fresh show cause notices, could not be issued beyond the normal period of limitation. Thus, the demand for the period prior to May 2006 was barred by limitation.

Conclusion:
The appeal was dismissed with directions for the respondent to file a fresh calculation for the period May 2006 to February 2007 and reverse the amount as per the recalculated figures, subject to verification by the Adjudicating Authority. The operative part of the order was pronounced in court upon conclusion of the hearing.