2024 (10) TMI 804 - AT - Central Excise

Rectification of mistake - error apparent on the face of record - time limitation - Interpretation of exempted goods under Notification No. 12/2012-CE for the purpose of Rule 6(3A) calculations - HELD THAT - It is found that when section 11A was amended, it was not specified that it will apply to only cases where the cause of action arises thereafter. It also did not say that the new limitation will have retrospective effect. In this case, the cause of action arose before the amendment, but the show cause notice was issued after the amendment. It is found that limitation is part of the procedural law and it will apply to those cases where the suit or proceedings have yet to be instituted, regardless of the period of the cause of action. If the cause of action arose before the amendment but the proceedings were initiated thereafter, the amended limitation will apply. However, if the period of limitation had already lapsed under the old law before initiating the proceedings, the amendment will not revive the lapsed period. In this case, although the cause of action arose prior to the amendment, the show cause notice was issued after the amendment. The cause of action, viz., the alleged short reversal of an amount under Rule 6(3A) occurred during April 2012 to March 2016 and the limitation was increased to two years on 14 May 2016. The show cause was issued on 6 June 2017. Therefore, the period from May 2015 to March 2016 was within the normal period of limitation of two years on the date of issue of show cause notice. The appellant itself had chosen the option of following Rule 6(3A) and the department had not forced it upon the appellant. Having chosen an option, the appellant calculated the amount to be paid in a particular manner which, according to the Revenue, was incorrect. Only the calculation of the amount is in dispute. Specifically, the dispute was whether the goods exempted by notification no. 12/2012-CE should be considered as exempted goods or not exempted goods for the purpose of calculation of an amount to be paid under Rule 6 (3A) of CCR, 2004. Once the assessee has chosen an option and the dispute is only regarding the recovery of the amount short paid as per Rule 6(3A), Rule 6 itself provides for recovery of such amount in the manner provided in Rule 14 of CCR. While Rule 14 itself does not provide for recovery of an amount not paid or short paid under Rule 6(3A), Explanation III to Rule 6 provides for such recovery. It is under this provision that the demand was made and confirmed. In fact, the learned counsel for the appellant himself admitted in his response to the department s Miscellaneous Application that this Explanation does provide for recovery of an amount but asserted that it does not provide for recovery of interest or imposition of penalty. Application filed by the Revenue is partly allowed and the demand of an amount under Rule 6(3A) within the normal period of limitation is upheld but not interest thereon or penalty.

Summary

Issues Involved:

1. Application of the amended limitation period under Section 11A of the Central Excise Act.
2. Recovery of interest and penalty under Rule 6(3A) of the CENVAT Credit Rules, 2004.
3. Consideration of new grounds and submissions by the appellant in the rectification application.
4. Interpretation of exempted goods under Notification No. 12/2012-CE for the purpose of Rule 6(3A) calculations.

Detailed Analysis:

1. Application of the Amended Limitation Period:

The Revenue filed an application for rectification of the final order, arguing that the demand, interest, and penalty were set aside on grounds of limitation. The Revenue contended that the normal period of limitation was increased to two years effective from May 14, 2016, and since the show cause notice was issued on June 6, 2017, part of the period was within the normal period of limitation. The Tribunal found that limitation is part of procedural law and applies to cases where proceedings are yet to be instituted, regardless of when the cause of action arose. Since the show cause notice was issued after the amendment, the period from May 2015 to March 2016 was within the normal period of limitation, and the demand for this period was upheld.

2. Recovery of Interest and Penalty:

The Tribunal examined whether interest and penalty could be recovered under Rule 6(3A) of the CENVAT Credit Rules. It was noted that while Rule 6(3A) provides for recovery of amounts short paid, it does not explicitly provide for recovery of interest or imposition of penalty. The Tribunal concluded that in the absence of specific provisions, interest and penalty cannot be confirmed. Therefore, the submission of the appellant's counsel was accepted, and the recovery of interest and penalty was set aside.

3. Consideration of New Grounds and Submissions:

The appellant filed a rectification application claiming that certain submissions were not considered in the final order and introduced a new ground. The Tribunal found that the submissions regarding the classification of goods as non-exempted were already addressed in the final order. The new ground, which was not raised at any prior stage, was rejected as it was not permissible to introduce new arguments in a rectification application. The Tribunal emphasized that Rule 41 of the CENVAT Credit Rules allows for rectification of errors apparent on record, not for re-arguing the case.

4. Interpretation of Exempted Goods:

The appellant argued that the goods cleared should not be considered exempted for the purpose of Rule 6(3A) calculations. The Tribunal referred to its previous findings that goods cannot be both dutiable and exempted simultaneously. It was concluded that the goods were exempted by Notification No. 12/2012-CE, and this classification was upheld. The Tribunal reiterated that the appellant's interpretation was incorrect and that the goods were indeed exempted, as no duty was paid under the claimed exemption.

Conclusion:

The Tribunal partially allowed the Revenue's application, upholding the demand for the period within the normal limitation but set aside interest and penalty. The appellant's application was rejected, and the final order was modified to reflect these findings. The matter was remanded to the Principal Commissioner for recalculating the demand for the specified period. The order was pronounced in open court on October 7, 2024.