2022 (6) TMI 556 - AT - Central Excise

CENVAT Credit - input - whether the appellant is justified in availing suo moto credit of excess duty paid in previous month on account of clearance of input effected under Rule 3(5) of Cenvat Credit Rules, 2004? - extended period of limitation - HELD THAT - The perusal of a case records shows for the identical issue, for the period August, 2011 to February, 2012 and April 2012 to July, 2017; August, 2012 to April, 2012, April 2013 to May, 2013 to June, 2014, three Show cause notices were issued to the appellants and those were adjudicated on 9th July, 2015 by a common adjudication order. Therefore, it is not correct to say that there is any suppression on the part of the appellant as the procedure adopted by the appellant was well within the knowledge of the Revenue way back since the year 2011 and accordingly extended period of limitation is not invocable on the facts of the present case - Otherwise also it is settled legal principle as laid down by the Hon ble Supreme Court in catena of decisions that something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before the assessee is saddled with any duty liability. Therefore, mere short payment of duty by the appellant is not sufficient in order to invoke the extended period. In the matter of SOUTH ASIAN PETROCHEM LTD. VERSUS CC. (AIRPORT ADMN.), KOLKATA 2007 (4) TMI 245 - CESTAT, KOLKATA , a Co-ordinate Bench of the Tribunal had even permitted the adjustment of excess payment towards education cess against the short payment of Central Excise duty. In the case laws cited by learned Chartered Accountant, it is found that repeatedly it has been held by Tribunal that excess payment of duty can be adjusted against tax liability. The procedure adopted by the appellant may not be proper but that itself cannot make it illegal per se. This procedure admittedly has been discontinued by the appellant w.e.f May, 2016. On the ground of limitation as well as on merits the appeal filed by the appellant deserves to be allowed and the same is accordingly allowed.

Summary

Issues:
1. Whether the appellant is justified in availing suo moto credit of excess duty paid in the previous month on account of clearance of input under Rule 3(5) of Cenvat Credit Rules, 2004?

Analysis:
1. The appellant, engaged in manufacturing various products, availed Cenvat Credit under Rule 3 of Cenvat Credit Rules, 2004. They outsourced services to M/s. Adonis Electronics Pvt. Ltd. for in-warranty and out-warranty products. The appellant adjusted excess Excise duty paid on in-warranty spares against duty payments for subsequent months. A show cause notice demanded Central Excise duty short paid in certain months, confirmed by the Adjudicating Authority. The appeal before the Commissioner (Appeals) was rejected.

2. The appellant's Chartered Accountant explained the procedure adopted, where excess duty paid on in-warranty spares was adjusted against future liabilities. The appellant discontinued this practice in May 2016. The appellant argued that excess payment can be adjusted against another clearance, citing Tribunal decisions. They also contended that the extended period is not applicable due to no intent to evade duty. The Revenue's Authorized Representative argued against the appellant's practice, stating it deviated from provisions and lacked statutory disclosure.

3. The Tribunal found that the Revenue was aware of the appellant's procedure since 2011. The Tribunal cited legal principles requiring positive action or deliberate withholding of information for duty liability. It was noted that the appellant filed periodic returns and provided information when requested. The Tribunal also considered the absence of suppression and fraudulent motive. The adjustment of excess duty paid in the previous month with subsequent liabilities was deemed reasonable, especially since the practice was discontinued in May 2016.

4. The Tribunal did not find any mention of unjust enrichment in previous orders or the show cause notice. The absence of evidence that the burden was passed on to the buyer led to the conclusion that the appellant's appeal should be allowed on grounds of limitation and merits. The appeal was allowed with consequential relief.

In conclusion, the Tribunal allowed the appeal, emphasizing the lack of suppression, the reasonableness of adjusting excess duty paid, and the absence of evidence for unjust enrichment.