2018 (8) TMI 313 - AT - Central Excise

Invocation of Extended Period of Limitation - CENVAT Credit - common inputs used in manufacture of dutiable as well as exempted goods - Light Diesel Oil (LDO) and Superior Kerosene Oil (SKO) - Held that - The issue relating to the period 2001-04 for which the Show Cause Notice was issued in 2006, the first decision of the Supreme Court was decided on 16.07.2008 and the Order-in-Original in the case on hand was passed on 13.04.2017 by which time a reference had been made by the Hon ble Apex Court itself for constituting a Larger Bench considering the fact that there were divergent views of two different Benches of the Hon ble Apex Court. This being the legal position requiring interpretation by the Hon ble Supreme Court, it can be safely assumed that there cannot be any scope for suppression and coupled with the pleadings that the appellant had declared in its ER-1 returns the facts that were legally required from time to time - invocation of larger period is not proper and unsustainable. Revenue has erred in invoking the extended period of limitation - appeal allowed on Limitation.

Summary

Issues:
Manufacture of cotton yarn without payment of excise duty, availing CENVAT Credit on inputs, alleged contravention of excise duty rules, invocation of extended period of limitation for demand of duty.

Manufacture of Cotton Yarn without Payment of Excise Duty:
The appellant, a manufacturer of cotton yarn, cleared cotton yarn without payment of excise duty during specific periods. A Show Cause Notice was issued alleging contravention of excise duty rules and demanding duty amount along with penalties. The appellant contested the allegations, arguing that inputs like LDO and SKO were used as fuel exclusively for manufacturing final products, i.e., cotton yarn, and not for exempted goods. The appellant cited conflicting decisions of the Supreme Court on similar issues and contended that the Show Cause Notice was beyond the normal limitation period.

Availing CENVAT Credit on Inputs:
The appellant availed CENVAT Credit on inputs like LDO and SKO used in the manufacturing process. The dispute arose regarding the appropriate usage of these inputs and whether they were used for dutiable or exempted goods. The appellant argued that the inputs were utilized solely for manufacturing cotton yarn, a dutiable product, and not for exempted goods. The appellant relied on legal precedents and contended that the interpretation favoring the taxpayer should be adopted.

Alleged Contravention of Excise Duty Rules:
The Show Cause Notice alleged contravention of excise duty rules by using LDO and SKO as fuel for manufacturing both dutiable and exempted goods without payment of duty. The appellant argued that their interpretation of the rules was supported by legal precedents and that suppression could not be alleged. The appellant maintained that they had disclosed all relevant facts in their monthly returns, emphasizing compliance with reporting requirements.

Invocation of Extended Period of Limitation:
The Revenue invoked the extended period of limitation based on alleged suppression of facts by the appellant. The appellant argued against the invocation of the extended period, citing legal provisions and emphasizing the timely disclosure of material facts in their monthly returns. The Tribunal refrained from deciding on the merits of the case due to a pending matter before a Larger Bench of the Supreme Court. Ultimately, the Tribunal held that the invocation of the extended period was improper and unsustainable, setting aside the impugned order based on the question of limitation.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the appellant and the Revenue, and the Tribunal's decision regarding the contravention of excise duty rules and the invocation of the extended period of limitation.