2024 (4) TMI 722 - AT - Central Excise

Invocation of Extended period of limitation - contravention of provision of rule 9(1)(f) of CCR - Levy of penalty u/r 15(3) of CCR - HELD THAT - The Commissioner (Appeals) has also not recorded any specific reasons of invoking the extended period of limitation - only reason given in the show cause notice for invoking extended period of limitation is that the appellant had contravened the provision of rule 9(1)(f) of CCR. It has been presumed that CENVAT credit was availed by the appellant with intention to increase its CENVAT balance with the logical consequence of non-payment of duty in cash and with intent to evade payment of duty. It is a well settled legal position that all show cause notices can be issued only within the normal period of limitation. To invoke extended period one of the aggravating factors necessary must be established. In this case the only reason for invoking extended period of limitation given in the show cause notice was that the appellant had availed CENVAT credit on the strength of ineligible documents in violation of Rule 9(1)(f) of CCR. The intention to evade payment has been presumed. The impugned orders and the OIO also do not indicate let alone establish the existence of any of the five aggravating factors. As the show cause notice was time barred and consequently the impugned orders which affirm the proposals in the show cause notice cannot be sustained and need to be set aside - Appeal allowed.

Summary

Issues Involved:
The issues involved in this case are the denial of CENVAT credit to the appellant based on allegedly ineligible invoices and the imposition of penalties under rule 15(3) of the CENVAT Credit Rules, 2004.

Denial of CENVAT Credit:
The appellant, a public sector undertaking engaged in coal production, availed CENVAT credit on mining services provided by a joint venture (JV) based on 13 disputed invoices. The department alleged that the JV issued these invoices without proper service tax registration and that the appellant should not have availed CENVAT credit on them. The department invoked rule 9(6) of the CENVAT Credit Rules, placing the burden of proving eligibility on the manufacturer. It was argued that the invoices contained incorrect service tax registration numbers and that the appellant had availed credit based on ineligible documents. The department issued a show cause notice seeking recovery of the CENVAT credit along with interest and penalties under section 11AC.

Extended Period of Limitation:
The department invoked the extended period of limitation, alleging that the appellant willfully availed improper CENVAT credit on fake invoices to inflate its CENVAT balance and evade service tax payment. However, the order did not specify the elements required to invoke the extended period, such as fraud, collusion, willful misstatement, suppression of fact, or violation of rules with intent to evade duty. The appellant argued that the show cause notice was time-barred as the reasons for invoking the extended period were not adequately established. The appellant contended that the intention to evade payment was presumed without concrete evidence of the aggravating factors necessary to justify the extended period.

Decision:
The Appellate Tribunal found that the show cause notice was time-barred due to the lack of specific reasons for invoking the extended period of limitation and the absence of evidence supporting the aggravating factors required for such invocation. As a result, the impugned orders denying CENVAT credit and imposing penalties were set aside, providing consequential relief to the appellant. Both appeals were allowed in favor of the appellant, highlighting the importance of establishing valid reasons for invoking the extended period of limitation in tax matters.