2013 (9) TMI 499 - AT - Central Excise

Cenvat Credit - Respondent is engaged in the manufacture of sugar, molasses, rectified spirit etc and is availing CENVAT credit on capital goods and inputs - They have a captive power generation plant, which is run by steam which is produced in the factory by the use of boilers wherein water treated with certain chemicals is used. The power generated by the captive power plant is partly used within the factory in the manufacture of final products, the surplus electricity being supplied to the AP Transmission Corporation Held that - The first show-cause notice was issued on 05.01.2007 for the period from December 2001 to November 2006. The rest of the show-cause notices were issued within the normal period. The respondent has paid duty with interest for the normal period in the wake of the decision of the Commissioner (Appeals). Therefore the question whether CENVAT credit on inputs used in the generation of electricity supplied to the AP Transmission Corporation during any part of the period of dispute does not survive. Moreover, this issue stands settled against the respondent in the present case by the Hon ble Supreme Court s judgment in the case of Maruti Suzuki Ltd. 2009 (8) TMI 14 - SUPREME COURT Extended period of limitation Intention to evade payment of duty Held that - In the instant case, the respondent did not deny the department s allegation that they had contravened various provisions with intent to evade payment of duty - Respondent had not contested the demand of duty in the first show-cause notice on the ground of limitation - Respondent did not deny the allegation that they had suppressed the sale of surplus electricity to the AP Transmission Corporation and the contravention of Rules with intent to evade payment of duty - This allegation was raised in the show-cause notice both in the context of invoking the extended period of limitation and in the context of invoking the penal provisions of Section 11AC. In the total absence of denial of this allegation, it has to be held that the respondent is liable to be mulcted with a penalty under Section 11AC and also extended period of limitation is invokable on them Decided in favor of revenue.

Summary

Issues Involved:
1. Whether the demand of duty raised in the first show-cause notice for the extended period of limitation was rightly set aside by the Commissioner (Appeals).
2. Whether the decision to set aside the penalties imposed on the respondent by the original authority is sustainable in law.

Issue-wise Detailed Analysis:

1. Demand of Duty for Extended Period of Limitation:
The first show-cause notice issued on 05.01.2007 covered the period from December 2001 to November 2006, invoking the extended period of limitation under the proviso to Section 11A (1) of the Central Excise Act. The department alleged that the respondent suppressed facts regarding the sale of surplus electricity to the AP Transmission Corporation and availed CENVAT credit without reversing proportionate credit, with intent to evade payment of duty. The Commissioner (Appeals) set aside the demand for the extended period, accepting the respondent's plea that all material facts were within the knowledge of the department through audits and regular filing of returns. However, this decision was challenged by the department, arguing that knowledge of the department does not negate suppression of facts by the respondent, as supported by the Hon'ble Gujarat High Court's ruling in Neminath Fabrics Pvt. Ltd. and the Hon'ble Supreme Court's judgment in CCE, Visakhapatnam Vs. M/s. Mehta & Co. The Tribunal found the Commissioner (Appeals)' decision unsustainable, holding that the suppression of facts with intent to evade duty was established, and thus, the demand for the extended period was justified.

2. Setting Aside of Penalties:
The penalties imposed by the original authority under Section 11AC of the Central Excise Act and Rule 15(1) of the CENVAT Credit Rules 2004 were set aside by the Commissioner (Appeals) due to the interpretative nature of the issue and lack of proof of malafides or suppression of facts. The department contested this, citing the respondent's failure to deny the allegations of suppression and intent to evade duty. The Tribunal referred to the Hon'ble Supreme Court's judgment in Maruti Suzuki Ltd., which set aside penalties due to the interpretative nature of the CENVAT Credit Rules and conflicting views among various tribunals. However, the Tribunal noted that the Maruti Suzuki judgment did not address penal liability under Section 11AC. Given the respondent's failure to contest the suppression allegations, the Tribunal held that the penalty under Section 11AC was warranted and restored it, while sustaining the appellate Commissioner's decision to set aside the Rule 15 penalties.

Conclusion:
a) The demand of duty for the extended period of limitation is upheld, with interest payable under Section 11AB.
b) The setting aside of Rule 15 penalties by the appellate Commissioner is sustained.
c) The Section 11AC penalty imposed by the original authority is restored.

Disposition:
The appeal is disposed of in the above terms, with the Tribunal pronouncing and dictating the judgment in open court.