2017 (1) TMI 757 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(3) of Cenvat Credit Rules - quantity of inputs removed, as such and on such quantity of goods purchased and sold without bring the same into the factory Time bar - Held that - audit was conducted on 20.06.2012 and show cause notice was issued after more than 30 months by invoking proviso to Sub section 1 of Section 11A of Central Excise Act, 1944 - the decision in the case of Triveni Engineering & Industries Ltd. 2015 (1) TMI 760 - ALLAHABAD HIGH COURT is squarely applicable where it was held that if the show cause notice is issued say after 22 months after audit was conducted then provision related to invocation of extended period for demand of duty are not invokable - the impugned show cause notice is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to Order-in-Original dated 30.03.2016 - Whether removal of inputs as such amounts to trading activity - Applicability of Rule 6(3) of Cenvat Credit Rules - Validity of show cause notice issued after an extended period post-audit.

Analysis:
The appellant, engaged in manufacturing Pipes & Tubes using HR Coils and availing Cenvat credit, faced a show cause notice proposing to recover &8377; 87,23,816 for removing inputs and trading goods without bringing them into the factory. The Revenue contended that such removals amounted to trading, making them liable under Rule 6(3) of Cenvat Credit Rules. The appellant cited precedents from Punjab & Haryana High Court and Allahabad High Court to challenge the demand. The Original Authority upheld the demand and penalty, leading to the appeal.

The appellant argued that the removal of inputs as such cannot be considered trading, citing the Punjab & Haryana High Court judgment. They also contended that goods traded without entering the factory shouldn't be subject to Rule 6(3) as no common inputs were used. The appellant highlighted the delay in issuing the show cause notice post-audit, invoking the extended period under Section 11A of the Central Excise Act, as unsustainable per the Allahabad High Court precedent.

After hearing arguments, the Tribunal noted the substantial delay between the audit and the show cause notice, exceeding 30 months, invoking the proviso under Section 11A. Following the Allahabad High Court ruling in Triveni Engineering & Industries Ltd., the Tribunal deemed the show cause notice unsustainable. Consequently, the Order-in-Original was set aside, and the appeal was allowed, entitling the appellant to consequential relief as per law. The miscellaneous application was also disposed of accordingly.