2018 (6) TMI 188 - AT - Central Excise

Cenvat credit on the sales/clearances returned on rejection by the buyer - Extended period of limitation invoked - Section 9D of CEA - admissible piece of evidence to prove default - Held that - The evidence in the shape of statement of Shri Ashwani Agarwal the Authorised Signatory of M/s Rana Steels is not admissible piece of evidence, as the same is hit by Section 9D of the Act - further, the courts below have not considered the applicability of Rule 16 of CER, 2002. The query regarding taking of Cenvat on the goods returned, was made by revenue on 24/06/2009 which had been replied along with evidence by the appellant-assessee. Accordingly, the impugned order is vitiated being not based on evidences on record and for relying upon evidences, having no evidentiary value. Further, the cogent explanation given by the appellant have not been found untrue in the course of investigation. Thus, the whole case of revenue is based on presumptions and assumptions. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit on sales/clearances returned by the buyer
2. Invocation of extended period of limitation in the show cause notice

Analysis:

Issue 1: Cenvat Credit on Sales/Clearances Returned by the Buyer

The case involved a dispute regarding the appellant taking Cenvat credit on M.S. Ingots returned by the buyer, which were rejected and returned to the appellant. The appellant issued invoices to cover up the shortage detected during a physical verification. The revenue alleged that the appellant manipulated the invoices and availed Cenvat credit wrongly. The show cause notice demanded disallowance of Cenvat credit, along with interest and penalty on the director of the appellant. The appellate authority confirmed the demand, but set aside the penalty on the director. The appellant contended that the show cause notice was barred by limitation and argued on merits, providing evidence of the goods being returned and transportation details. The revenue relied on evidence from the accounts manager of the buyer but failed to produce him for cross-examination. The appellate tribunal found the evidence inadmissible, noted the failure to consider Rule 16 of CER 2002, and criticized the lack of reconciliation of stock and invoices. The tribunal held that the revenue's case was based on presumptions and assumptions, ultimately allowing the appeal and setting aside the impugned order.

Issue 2: Invocation of Extended Period of Limitation

The appellant argued that the show cause notice was beyond the limitation period as it was issued more than 12 months after the initial query by the Range Superintendent. The appellant contended that the notice dated 11.01.2010 was time-barred. The tribunal agreed with the appellant, holding that the notice issued after more than 12 months from the initial query was indeed barred by limitation. This finding further supported the decision to allow the appeal and set aside the impugned order related to the appellant company.

In conclusion, the tribunal's detailed analysis highlighted procedural flaws, evidentiary issues, and lack of reconciliation in the case, leading to the allowance of the appeal and the setting aside of the demand for disallowance of Cenvat credit, interest, and penalty on the appellant company.