2014 (2) TMI 586 - AT - Central Excise

Excisability - Manufacture - dispute regarding manufacturer - demand imposed in relation to availing the facility of Cenvat credit of duty paid on the furnace oil used in the manufacture of electricity - Held that - no reversal liability of Cenvat credit would arise in respect of assessee where no separate accounts are being maintained in case of fuel which is being used for dutiable as also for exempted final product. If the expert bodies, judicial as well as quasi judicial, have interpreted the law in favour of the assessee, the assessee cannot be held guilty of any suppression or mis-statement etc. Inasmuch as the show cause notice stand issued by invoking the longer period of limitation, I hold that demand is barred by limitation - Following decision of M/s. Diamond Cements Ltd. Versus Commissioner of Central Excise Bhopal 2012 (6) TMI 73 - CESTAT, NEW DELHI - longer period of limitation was not available to the Revenue. Consequently, the imposition of penalty upon them would not be justified. However, inasmuch as a part of the demand would fall within the limitation period, the matter is being remanded for quantification of the same - Decided in favour of assessee.

Summary

Issues:
- Entitlement to Cenvat credit on duty paid for furnace oil used in electricity generation and diversion to residential colony.
- Demand raised against the appellant for the period July 2000 to September 2004.
- Disallowance of credit and penalty imposed by original adjudicating authority.
- Applicability of longer period of limitation.
- Interpretation of Rule 6(2) of Cenvat Credit Rules.
- Allegations of suppression and mis-statement.
- Decision regarding the imposition of penalty.

Analysis:

1. The appellant, engaged in cement and clinker manufacturing, used furnace oil to generate electricity, part of which was diverted to their residential colony. A demand of duty was raised against them for the period July 2000 to September 2004 due to the diversion. The original adjudicating authority disallowed the credit and imposed a penalty, a decision upheld by the Commissioner (Appeals), leading to the present appeal.

2. The advocate for the appellant acknowledged that the issue had been decided against them by the Supreme Court but argued that during the relevant period, there were decisions favoring the assessee. Citing a Tribunal decision in a similar case, the advocate contended that no malafide intent could be attributed to the appellant. It was agreed that a part of the demand fell within the longer period, which the appellant did not dispute.

3. The Tribunal referred to a previous case where it was held that if higher appellate forums had ruled in favor of the assessee during the relevant period, no suppression could be alleged. In this case, various judicial bodies had interpreted Rule 6(2) of the Cenvat Credit Rules to the benefit of the assessee, absolving them of any wrongdoing. Consequently, the demand was deemed barred by limitation, and the impugned order was set aside, providing relief to the appellant.

4. Following the same reasoning, the Tribunal determined that the longer period of limitation was not applicable to the Revenue, thereby justifying the decision to not impose a penalty. However, as a part of the demand fell within the limitation period, the matter was remanded for quantification before the appeal was disposed of accordingly.