2018 (9) TMI 1438 - HC - Central Excise

CENVAT credit - input services - GTA service - place of removal - recovery of CENVAT credit with Interest and penalty - Held that - Though a plea was taken by the assessee in his reply that by issue of N/N. 2014-CE(NT) dated 11/07/2014, sub-rule (qa) has been inserted in Rule 2 of Cenvat Credit Rules 2004 incorporating the definition of place of removal, the Cenvat credit on outward freight was stopped w.e.f. 11/07/2014. This defense by the assessee appeared to be deliberate to overcome the show cause because even prior to insertion of definition of place of removal under Cenvat Credit Rules, 2004, the same definition of place of removal under Section 4(3)(c) of 1944 Act was applicable for Rule 2 of Rules 2004 in terms of Rule 2(t) of the 2004 Rules which stipulates that words and expressions used in these rules and not defined but defined in the Excise Act or Finance Act shall have the meanings respectively assigned to them in those Act . Since the appellant in contravention of the provisions contained in Section 4(3)(c) of 1944 Act read with Rule 2(t) of the Rules 2004 availed the Cenvat Credit which was not available, the Revenue, was within its right in imposing recovery, interest and penalty. No substantial question of law arises for consideration - appeal dismissed.

Summary

Issues Involved:
1. Disallowance of Cenvat Credit on outward freight beyond the place of removal.
2. Invocation of extended period for demand beyond one year on the grounds of suppression.
3. Legality of the penalty imposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
4. Whether the show cause notice was time-barred.

Detailed Analysis:

1. Disallowance of Cenvat Credit on outward freight beyond the place of removal:
The appellant, engaged in the manufacture of excisable goods, availed Cenvat Credit on outward freight paid beyond the place of removal, amounting to ?70,714/-. The Assistant Commissioner held that prior to the insertion of the definition of "place of removal" under the Cenvat Credit Rules, 2004, the definition under Section 4(3)(c) of the Central Excise Act, 1944, was applicable. Thus, the credit on outward freight beyond the place of removal was inadmissible, leading to recovery of the amount along with interest.

2. Invocation of extended period for demand beyond one year on the grounds of suppression:
The appellant argued that the show cause notice was time-barred as it was issued beyond the normal period of one year. However, the Commissioner (Appeals) and CESAT upheld the invocation of the extended period of five years under Section 11A(4) of the Central Excise Act, 1944, due to suppression of facts. The show cause notice explicitly mentioned that the appellant had availed Cenvat Credit with the intent to evade payment of duty, justifying the extended period.

3. Legality of the penalty imposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944:
The penalty was imposed on the grounds that the appellant had contravened Rule 2(I) read with Rule 2(t) of the Cenvat Credit Rules, 2004, with the intent to evade payment of duty. The Commissioner (Appeals) noted that mens rea is not necessary for imposing a penalty under Section 11AC of the Act. The CESAT upheld this view, leading to the confirmation of the penalty imposed.

4. Whether the show cause notice was time-barred:
The appellant contended that the show cause notice was issued beyond the normal period of one year, making it time-barred. However, the court found that the extended period of five years was applicable due to the suppression of facts by the appellant. The court relied on the provisions of Section 11A(4) of the Central Excise Act, 1944, and relevant case laws, including Escorts Limited and M/s Larsen & Toubro Ltd., which emphasized the need for clear allegations of suppression to justify the extended period.

Conclusion:
The court concluded that the appellant had availed Cenvat Credit in contravention of the provisions of the Central Excise Act, 1944, and the Cenvat Credit Rules, 2004. The invocation of the extended period for demand was justified due to the suppression of facts. Consequently, the appeal was dismissed, and the recovery of ?70,714/- along with interest and penalty was upheld. No substantial question of law was found to arise for consideration.