2017 (4) TMI 30 - HC - Central Excise

Time limitation for issuance of SCN - assessing officer sent a notice to the assessee asking it to furnish documents to show on what basis it was claiming Cenvat credit on the construction items - Held that - Section 11A(3) of the CEA, 1944 provides limitation of one year to the Central Excise Officer to issue notice to the assessee. However sub-section (4) provides that when there is fraud; collusion; any wilful mis-statement; suppression of fact and contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, the period of limitation will be five years. The assessee has not withheld any fact; the assessee has not misstated any fact; the assessee has not suppressed any facts. The assessee may have been guilty of claiming wrong Cenvat credit but as pointed out by the CESTAT, there continues to be divergence of opinion with regard to the issue whether Cenvat credit can be claimed on the inputs used for setting up the factory in which goods were manufactured. Therefore, it cannot be said to be a fraudulent claim or a claim which has an aspect of dishonesty attached to it - In this view of the matter, limitation would only be one year. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Limitation period for issuing notice to assessee under Central Excise Act, 1944.
2. Eligibility of Cenvat credit on construction items used for setting up a factory.

Analysis:

Issue 1: Limitation period for issuing notice
The case involved appeals against the orders of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the limitation period for issuing a notice to the assessee. The Revenue contended that the notice issued to the assessee was beyond the period of limitation. Section 11A(3) of the Central Excise Act, 1944 provides a limitation of one year for the Central Excise Officer to issue a notice to the assessee. However, sub-section (4) extends the limitation to five years in cases involving fraud, collusion, wilful misstatement, suppression of fact, or contravention of provisions to evade duty payment.

Analysis:
The CESTAT held that sub-section (4) extending the limitation to five years was not applicable in this case. The items for which the assessee claimed Cenvat credit were not directly related to the manufacturing of Sugar and Molasses. The CESTAT found that the assessee did not suppress or misstate any facts, and therefore, the limitation period should be one year, not five years. The High Court concurred with this finding, emphasizing that the question of limitation, though sometimes a mixed question of law and fact, did not raise any substantial question of law in this instance.

Issue 2: Eligibility of Cenvat credit on construction items
The assessee, a manufacturer of Sugar and Molasses, had claimed Cenvat credit for the period June 2002 to January 2006 on construction items used for setting up the manufacturing plant. The Revenue contended that the construction items like M.S. beams, channels, angles, flats, etc., were not eligible for Cenvat credit as they were not directly related to the manufacturing process of Sugar and Molasses but were used for building construction.

Analysis:
The High Court agreed with the CESTAT's view that the assessee's claim for Cenvat credit on construction items did not amount to fraud or dishonesty. The court noted that there was a divergence of opinion on whether Cenvat credit could be claimed on inputs used for setting up the factory where goods were manufactured. Since the assessee did not withhold, misstate, or suppress any facts, the claim was not fraudulent. Therefore, the High Court upheld the decision that the limitation period for issuing the notice to the assessee was one year and dismissed the appeals.

In conclusion, the High Court affirmed the CESTAT's decision that the notice issued to the assessee was within the one-year limitation period as the claim for Cenvat credit on construction items did not involve fraud or suppression of facts.