2024 (11) TMI 713 - AT - Central Excise

Reversal of CENVAT Credit - denial of credit on the ground that the drawback is admissible on the exported goods and the conditions that no Cenvat Credit of input and input services is availed in respect of the goods exported - Time limitation. Whether demand is barred by period of limitation or not? - HELD THAT - The department was aware fully about the facts of the matter since 28.04.2008 as the appellant has informed them in detail regarding reversal of Cenvat Credit done by them on various inputs as mentioned in the annexure to their letter dated 28.04.2008. These facts categorically establish that it was well within the knowledge of the department regarding the reversal of Cenvat Credit by the appellant. The impugned show cause notice came to be issued on 29.03.2013 invoking the extended time proviso under section 11A(4) of the central excise act 1994 read with rule 14 of the Cenvat Credit rule 2004 which is not legally sustainable we are therefore are of view that the show cause notice is hit by period of limitation and we hold that extended time proviso is not invokable in this case as the department was in know of facts since 28.04.2008. The show cause notice has been issued in the month of March, 2013 much beyond the normal period of limitation. The impugned show cause notice as well as impugned order-in-original are bared by period of limitation. The impugned order-in-original is without any merit and therefore same is set aside - appeal allowed.

Issues Involved:

1. Short reversal of Cenvat Credit on dyes, chemicals, furnace oil, and packing materials.
2. Incorrect calculation of costs for sizing, colors, and chemicals.
3. Demand for reversal of Cenvat Credit on various categories of goods.
4. Application of extended time proviso under Section 11A(4) of the Central Excise Act, 1944.
5. Allegations of suppression of facts and applicability of limitation period.

Detailed Analysis:

1. Short Reversal of Cenvat Credit:

The department contended that the appellant had short reversed the Cenvat Credit on dyes, chemicals, furnace oil, and packing materials used in the finished goods exported under the duty drawback scheme. The demand for reversal amounted to Rs. 59,21,429/-. The appellant argued that they had correctly reversed the Cenvat Credit based on the actual usage of inputs in the manufacturing process, and the department's calculations were flawed.

2. Incorrect Calculation of Costs:

The department calculated the cost of sizing and chemicals at Rs. 8.66 per meter based on the total quantity of processed fabric. The appellant contested this, stating that sizing was only applied to yarn processed within their factory, not on all fabrics. They argued that the correct cost should be Rs. 4.94 per meter for sizing and Rs. 7.40 per meter for colors and chemicals, as supported by their audit report. The appellant maintained that the department's calculations erroneously included costs for fabrics not processed in-house.

3. Demand for Reversal of Cenvat Credit on Various Categories of Goods:

The appellant challenged several demands for reversal of Cenvat Credit, including:

- Rs. 3,22,765/- on dyes and chemicals for processed fabric (own) as of 31.03.2008.
- Rs. 3,13,166/- on dyes for processed fabric (job work).
- Rs. 79,477/- on dyes and sizing chemicals for made-ups.
- Rs. 5,15,857/- on made-ups (WIP).
- Rs. 7,10,002/- on furnace oil.
- Rs. 10,06,655/- on packing material.

The appellant argued that the department's demands were unsustainable as they had reversed the Cenvat Credit based on actual stock and usage, and the department's calculations were incorrect.

4. Application of Extended Time Proviso:

The department issued a show cause notice on 29.03.2013, invoking the extended time proviso under Section 11A(4) of the Central Excise Act, 1944. The appellant argued that the department was informed on 28.04.2008 about the reversal of Cenvat Credit when they shifted from the DEPB scheme to the duty drawback scheme. As the department was aware of the facts since 2008, the extended time proviso was not applicable, and the demand was barred by limitation.

5. Allegations of Suppression of Facts:

The appellant contended that there was no suppression of facts, as all relevant information was disclosed to the department in 2008. The tribunal noted that for invoking the extended time proviso, elements such as fraud, collusion, or willful misstatement must be present, which were absent in this case. Citing Supreme Court decisions, the tribunal held that the department's knowledge of the facts precluded allegations of suppression.

Conclusion:

The tribunal concluded that the department's demand was unsustainable due to incorrect calculations and the absence of suppression of facts. The show cause notice was issued beyond the normal limitation period, rendering it invalid. Consequently, the impugned order was set aside, and the appeals were allowed.

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