2022 (10) TMI 1004 - AT - Central Excise

CENVAT Credit - inputs - capital goods - short payment of duty due to difference in assessable value in ER-I Return vis- -vis with the sales register - whether the show cause notice was rightly issued invoking the extended period of limitation? - HELD THAT - The items Floor Top Hardener/Paint has been used for repair maintenance of the floor of the factory for filling in the gaps between the floor tiles. Accordingly, this is an eligible input under Rule 2 (k) of the Cenvat Credit Rules and accordingly, cenvat credit on the same is allowable. CENVAT Credit - capital goods - Induction lamps - Lift table - HELD THAT - These are essential for use in the factory, without which taxable finished goods cannot be manufactured. Demand of Rs.90,665/- - it is alleged in the show cause notice that during re-conciliation of the assessable value shown in ER-1 Returns vis- -vis Sales Register, there was some apparent difference, on which duty has been demanded - HELD THAT - The appellant have explained that this relates to the period May, 2016 and Jan. 2017. In order to arrive at the correct excise duty liability, they receive reports from the SAP Programmes, which were duly verified from the Accounts for discharging the excise duty liability. It is explained that there is some difference in the assessable value as per data submitted to the Audit and as per ER-I Return, as the assessee is working under MRP basis, under which duty was paid on the MRP subject to abatement. The appellant has turnover of approximately Rs.30 plus crores p.m. and hence for such accounting difference, no adverse inference can be called for - no duty can be demanded as there is no case made out of any clandestine removal on the part of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Denial of cenvat credit on inputs, capital goods, and short payment of duty due to a difference in assessable value in ER-1 Return vs. sales register.
2. Validity of show cause notice issued invoking the extended period of limitation.

Analysis:

Issue 1: Denial of cenvat credit and short payment of duty:
The appellant, engaged in manufacturing Motor Vehicles/Tractors, availed Cenvat Credit on inputs, capital goods, and input services as per Cenvat Credit Rules, 2004. A show cause notice was issued proposing to demand Cenvat credit on paints/chemicals, capital goods, and duty due to assessable value differences. The appellant contested the demand, arguing that the extended period of limitation was wrongly invoked without alleging fraud or suppression. The appellant explained the usage of disputed items and denied any duty shortfall. The Assistant Commissioner passed an ex parte order confirming the demand, which was beyond the scope of the show cause notice. The Commissioner (Appeals) partially allowed the credit on certain capital goods but confirmed the demand on other issues.

Issue 2: Validity of show cause notice:
The appellant challenged the show cause notice's validity, arguing that the extended period of limitation was invoked without meeting essential requirements. The appellant's detailed reply highlighted factual inaccuracies and vagueness in the notice. The order-in-original was passed ex parte during the Covid pandemic, confirming the demand without proper adjudication. The Commissioner (Appeals) upheld part of the demand, leading to the present appeal.

The appellate tribunal, after hearing both parties, examined the issues in detail. It found that the Floor Top Hardener used by the appellant was an eligible input under the Cenvat Credit Rules. Additionally, it deemed capital goods like Induction Lamps and Lift Table essential for manufacturing taxable goods. The tribunal accepted the appellant's explanation for the assessable value difference, considering the minor accounting discrepancies due to the MRP basis of operation. Consequently, the tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits.

In conclusion, the tribunal ruled in favor of the appellant, allowing cenvat credit on eligible items, acknowledging the importance of essential capital goods, and dismissing the demand for duty based on minor assessable value differences. The issue of limitation was left open, and the appellant was granted relief in accordance with the law.