2013 (11) TMI 850 - AT - Central Excise

Extended period of Limitation removal of input as such under the guise of manufacture charging duty of excise - demand under section 11D - Held that - The assesse has made out a case on limitation - It is to be noted that the said ER-1 specifically indicates that invoices under which the goods were cleared and remarks also talks about clearance of moulds on sales - the extended period of limitation cannot be invoked are also fortified from the statements of Director recorded on the date of visit of factory premises by the Preventive Officers - There cannot be any dispute or motive attached to the said payment of Central Excise duty by the appellant on the mould which were billed to their clients - The findings recorded by both the lower authorities on limitation seems to be only the presumptions and not on the factual matrix as the first appellate authority has recorded that contention of the appellant is quite astute and pre-meditated one. Period of limitation for demand under section 11D - revenue relied upon the decision in the case of CCE, Ahmedabad-II vs. Inductotherm (I) Pvt. 2012 (12) TMI 856 - GUJARAT HIGH COURT that period of limitation is not applicable under section 11D - held that - As regards the submissions of learned Additional Commissioner (AR) that the show cause notice, even if it is indicating wrong Section or Rule, does not preclude from demanding duty under the correct provisions, seems to be misplaced, inasmuch as the provisions of Section 11D are different provisions and needs to be invoked in a situation where it demands whereas, in the case in hand, it is very clear that the Revenue authorities invoked the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944, which in my view cannot be sustained due to the fact that appellants have made out a case on limitation. - Decided in favor of assessee.

Summary

Issues:
1. Demand of wrongly utilized cenvat credit under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944.
2. Imposition of interest and penalties on the main appellant and the Director.
3. Interpretation of the judgment in the case of CCE, Ahmedabad-II vs. Inductotherm (I) Pvt. Limited.
4. Applicability of limitation on the demands raised.

Analysis:

Issue 1: Demand of wrongly utilized cenvat credit
The main appellant was found purchasing aluminium moulds from the open market and recovering the cost from clients through Central Excise invoices. The appellant paid duty from the Cenvat account, leading to a show cause notice for demanding wrongly utilized cenvat credit under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. The adjudicating authority confirmed the demands, imposed interest, and penalties. The first appellate authority upheld the decision. The appellant argued bonafide belief in paying duty and cited a High Court judgment. The Tribunal noted the appellant's compliance with filing excise returns and the absence of objections from the Revenue for several years. The Tribunal found the demands hit by limitation and set them aside.

Issue 2: Interest and penalties
Since the demands were set aside due to limitation, the question of demanding interest and imposing penalties on the appellants did not arise. The Tribunal did not address these aspects further.

Issue 3: Interpretation of the Inductotherm case
The Tribunal differentiated the case at hand from the Inductotherm case, emphasizing the specific provisions invoked in the show cause notice. While the Inductotherm case involved Section 11D, the current case invoked Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. The Tribunal concluded that the appellant's case on limitation was strong, leading to the setting aside of the demands.

Issue 4: Applicability of limitation
The Tribunal extensively analyzed the limitation aspect, considering the appellant's consistent reporting in excise returns, lack of objections from Revenue, and the Director's statements acknowledging bonafide belief in paying duty. The Tribunal found the lower authorities' findings on limitation to be presumptive and unsupported by facts. Consequently, the demands were set aside based on the limitation argument presented by the appellant.

In conclusion, the Tribunal set aside the impugned orders, allowed the appeals, and provided relief to the appellants due to the demands being hit by limitation. The Tribunal emphasized the importance of correct invocation of provisions in show cause notices and upheld the appellant's argument on bonafide belief and compliance with excise reporting requirements.