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2022 (4) TMI 932 - HC - Central ExciseCENVAT Credit - waste and scrap or not - inputs which have not been received back by the respondent-assessee from the job workers - reversal in terms of Rule 4(5) (a) of the Cenvat Credit Rules 2002/2004 - violation of mandatory provision of Rule 4(6) of the Cenvat Credit Rules 2002 - not obtaining permission from the jurisdictional Central Excise Authority when the goods are not received back into the factory and are removed from Job Workers premises - principles of res-judicata - time limitation to issue SCN - SCN is exact replica of earlier period - HELD THAT - Applying the principles of consistency the order binds the department as the transaction is identical and there is no fresh materials available with the Commissioner justifying the issuance of the show cause notice dated 30.04.2007. Merely by stating that the earlier order of adjudication came to be passed without calling for any conclusive evidence cannot be a ground to ignore the earlier order of adjudication. Precisely for such reason we had extracted the relevant paragraphs of the order of adjudication dated 25.05.2004. A perusal of the said order shows that it is a speaking order and the Commissioner has assigned reasons as to why the proposal in the show cause notice should be dropped. Therefore the department was wholly unjustified in not only issuing the show cause notice dated 30.04.2007 but also by preferring this appeal. In fact this is a fit case where exemplary cost has to be imposed on the concerned official of the department for attempting to resurrect a settled issue. The Commissioner who issued the show cause notice dated 31.02.2004 after receiving the reply from the respondent assessee and after hearing the authorized representative in person by a speaking order dated 25.05.2004 dropped the proceedings. The department did not challenge the said order before the learned Tribunal. That apart part of the period for which the show cause notice dated 30.04.2007 was issued overlaps the period covered in the earlier show cause notice dated 31.03.2004. Therefore it can be safely concluded that the proceedings initiated in the year 2007 presumably after change of the Commissioner were without any legal basis and can also be termed as misuse of statutory power conferred on the authority. Whether the show cause notice dated 30.04.2007 was issued within the time permissible or was it time barred? - HELD THAT - Admittedly the show cause notice was not issued within the time prescribed under Section 11A (1) of the Act. But the Commissioner had invoked the extended period. If such be the case what are the fundamental tenets which are required to be fulfilled for invoking the extended period of limitation is required to be seen. For the same subject-matter the earlier show cause notice dated 31.03.2004 was issued. After adjudication the proceedings were dropped the order attained finality. On the same subject-matter in the year 2007 another notice was issued of which part of the period overlapped. If such is the case the department can never bring the case of the assessee to be a wilful suppression or mis-statement and if that be the legal position the extended period under Section 11A cannot be invoked. Furthermore on perusal of the show cause notice dated 30.04.2007 we find that there is no allegation against the respondent assessee of wilful suppression or mis-statement though the words wilfully suppressed has been used in one place in the show cause notice. Mere use of the words or expression wilfully suppressed with intend to avoid duty cannot hold the assessee guilty of wilful suppression. The same has to be established by the department by pointing out as to on what basis they have come to the prima facie conclusion that there has been wilful mis-statement or suppression of facts. Therefore mere use of the said words and expression cannot validate the show cause notice. Therefore the initiation of the proceedings itself is bad in law - There is nothing to indicate that the appellant revenue doubted the bona fides of the respondent assessee. In such circumstances extended period of limitation could never have been invoked in the assessee s case. Thus if Section 11A of the Act could not have been invoked the question of imposing penalty or levying interest also does not arise. All these factors are taken into consideration and the Tribunal has rightly granted relief to the assessee. There are no grounds to interfere with the order passed by the Tribunal - appeal dismissed.
Issues Involved:
1. Perverse findings of the Tribunal regarding inputs not received back. 2. Correctness of the value of non-returned inputs adopted by the respondent-assessee. 3. Liability of the respondent to pay an amount equivalent to the Cenvat Credit for inputs not received back within 180 days. 4. Violation of Rule 4(6) of the Cenvat Credit Rules, 2002 by not obtaining permission from the jurisdictional Central Excise Authority. 5. Applicability of the principle of Res judicata in tax matters. Issue-wise Detailed Analysis: 1. Perverse Findings of the Tribunal: The revenue challenged the Tribunal's conclusion that the inputs not received back by the respondent-assessee from the job workers were 'waste and scrap.' The Tribunal's decision was based on the premise that the waste and scrap generated during the manufacturing process were duly declared and appropriate Central Excise duty was paid. The High Court upheld the Tribunal's findings, emphasizing that the Commissioner’s earlier order dated 25.05.2004 had already addressed this issue, and the department had accepted it, thus binding the department to the same conclusion for subsequent periods. 2. Correctness of the Value of Non-returned Inputs: The revenue questioned the value adopted by the respondent-assessee for the non-returned inputs, arguing it was based on assumptions without conclusive evidence. The High Court noted that the Commissioner’s earlier adjudication had established a standardized method for determining the quantity of waste and scrap generated, which was in line with industry standards. The Tribunal had relied on this adjudication, and the High Court found no reason to deviate from this established practice. 3. Liability to Pay Amount Equivalent to Cenvat Credit: The revenue contended that the respondent was liable to pay an amount equivalent to the Cenvat Credit for inputs not received back within 180 days, as per Rule 4(5)(a) of the Cenvat Credit Rules. The High Court observed that the Commissioner’s order dated 25.05.2004 had concluded that there was no requirement to reverse the credit or pay an equivalent amount for inputs not received back, as the duty on waste and scrap was duly paid. This order had attained finality, and the High Court upheld the Tribunal's decision that there was no liability to pay the amount equivalent to the Cenvat Credit. 4. Violation of Rule 4(6) of the Cenvat Credit Rules: The revenue argued that the respondent violated Rule 4(6) by not obtaining permission from the jurisdictional Central Excise Authority when the goods were not received back into the factory. The High Court noted that the Commissioner’s earlier order had addressed this issue, stating that waste and scrap could be removed from the job workers' premises without reversing the credit. The Tribunal's decision was consistent with this interpretation, and the High Court found no violation of Rule 4(6). 5. Applicability of Res Judicata: The revenue contended that the principle of Res judicata, which prevents the same issue from being litigated multiple times, did not apply in tax matters. The High Court referred to several Supreme Court decisions, including Jayaswal Neco Limited and Birla Corporation Ltd., which established that the department cannot take a different stand in subsequent cases when an issue has already been settled. The High Court held that the principle of consistency bound the department to the earlier adjudication, and the issuance of a new show cause notice on the same grounds was unjustified. Conclusion: The High Court dismissed the appeal, finding no grounds to interfere with the Tribunal's order. The substantial questions of law regarding the perverse findings, correctness of value, and liability to pay equivalent amounts were answered against the appellant revenue. The questions regarding the violation of Rule 4(6) and the applicability of Res judicata were left open for consideration in appropriate future cases.
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