2019 (3) TMI 181 - AT - Central Excise

Extended period of limitation - penalty - irregular credit availed on input services - credit on disputed services was reversed along with interest much before the issuance of the SCN - malafide intent present or not - Held that - The allegation in the SCN is mere suppression of facts without anything further. There is no such allegation that the Appellants was under legal obligation to give invoice wise and item wise details of Cenvat credit which they have not given. Merely, mentioning malafide intention or suppression of facts or willful default is not sufficient. There has to have something more to prove malafide/ suppression/ willful default on the part of the Appellant. In the present case, none of the authorities below have brought out any evidence on record to substantiate the allegation of suppression of fact or willful default on the part of the Appellant. All the transactions were duly reflected in excise return and this itself support the submission of the Appellant that there was no intention on the part of the Appellant to deliberate suppress any information with intention to evade payment of duty. Mensrea or malafide intention is necessary ingredients for invoking the extended period and also for imposing penalty - also, it is clear that immediately upon pointing out by the Audit, the Appellant reversed the entire Cenvat credit of ₹ 12,95,069/- with interest, without even waiting for show cause notice and this itself establishes that it is a case of bonafide mistake and there was no intention to evade duty. Penalty u/s 11AC of CEA - Held that - The authorities below have failed to brought on record any evidence to prove suppression on the part of the Appellant and the Appellant by his conduct has proved that there was no malafide intention on the part of the Appellant and it was only a bonafide error/belief on the part of the Appellant, therefore neither extended period of limitation is invocable in the facts of the present case nor penalty is liable to be imposed on the Appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Invocation of extended period of limitation and penalty in the present appeal.

Analysis:

1. Invocation of Extended Period of Limitation:
The core dispute in the appeal was regarding the invocation of the extended period of limitation and penalty. The Appellant, a manufacturer of lubricating oil and grease, had utilized Cenvat credit against invoices of input services issued by a supplier for services related to erection, commissioning, and painting. Despite depositing the entire duty amount along with interest after an objection by the Audit, a show cause notice was issued for recovery of Cenvat credit amount. The Adjudicating Authority confirmed the demand and imposed a penalty. On appeal, the Commissioner upheld the decision. The Appellant argued that the disputed services were essential for production activities and were covered within the definition of input services. The Tribunal found that there was no evidence of malafide intention or willful default on the part of the Appellant. The Supreme Court precedent highlighted that specific allegations must be proven by the Revenue to invoke the extended period. As all transactions were duly reflected in excise returns, it was concluded that there was no intention to evade duty. The Tribunal observed that the Appellant's immediate reversal of Cenvat credit upon Audit's pointing out indicated a bonafide mistake rather than an intention to evade duty. Therefore, the extended period of limitation was not applicable in this case.

2. Penalty Imposition:
Regarding the penalty under Section 11AC of the Central Excise Act, the Tribunal referred to Supreme Court decisions emphasizing that suppression or misstatement of facts must be willful to constitute grounds for penalty. It was established that there was no evidence of suppression on the part of the Appellant, and their conduct demonstrated a lack of malafide intention. The Tribunal concluded that since the Appellant's actions were based on a bonafide error/belief, the imposition of penalty was unwarranted. As the authorities failed to provide evidence of suppression, the penalty was not justified. Therefore, the appeal was allowed, and consequential relief was granted to the Appellant.

In summary, the Tribunal ruled in favor of the Appellant, stating that there was no malafide intention or willful default in the case. The extended period of limitation was deemed inapplicable, and the penalty under Section 11AC was not imposed due to the Appellant's bonafide error. The judgment highlighted the importance of proving specific allegations to invoke extended periods and penalties in excise matters.