2024 (7) TMI 376 - AT - Central Excise

Recovery of CENVAT Credit - capital goods - reversals under Rule 3(5), (5A) (5B) of CENVAT Credit Rules, 2004 prior to amendment carried out by Notification No. 03/2012-CE(NT) dated 01.03.2013 - revenue neutrality - extended period of limitation. HELD THAT - The present appeal can be disposed of only on the issue of time bar without going into merit of the case. The period involved in the present case is 2009-10 and the show cause notice was issued on 24.06.2013. The fact is not undisputed that the appellant have cleared the capital goods as such on payment of excise duty at the rate prevailing at the time of removal. The said transaction was reflected in their ER-1 return. Therefore, the only dispute was the amount of Cenvat credit to be paid by the appellant which was very much known to the department when the appellant cleared it on the invoice and reflected in ER-1 return. It is also fact on record that this issue was raised by the Audit party in 2010 despite that the show cause notice was not issued within the normal period. It is also noted that whatever short paid duty as per the department was available as a Cenvat credit to their own recipient unit of capital goods. Therefore, the present case is also involved revenue neutrality. This also shows that there is no mala fide intention on the part of the appellant for short payment of duty on removal of capital goods. There is no suppression of fact or mis-declaration with intent to evade payment of duty on the part of the appellant. Therefore, demand is clearly hit by limitation, as the entire period involved is under extended period of limitation. The demand is set aside on the ground of time bar itself without going into the merit of the case - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Recovery under Rule 14 of CENVAT Credit Rules, 2004 for reversals under Rule 3(5), (5A) & (5B) prior to the amendment dated 01.03.2013.
2. Requirement to reverse CENVAT credit under Rule 3(5) in the present case.
3. Invocation of extended period of limitation.

Analysis:

Issue 1: Recovery under Rule 14 of CENVAT Credit Rules, 2004
The appellant argued that the demand raised invoking Rule 3(5), (5A), and (5B) of CENVAT Credit Rules, 2004 was without jurisdiction as there was no mechanism for recovery of CENVAT credit on capital goods removed as such during the relevant period. They highlighted that the amendment introducing the provision for recovery was made post the period in question. The appellant contended that without a specific provision for recovery, the demand confirmation was unjustified. They supported their argument by citing various judgments that emphasized similar points.

Issue 2: Requirement to reverse CENVAT credit under Rule 3(5)
The appellant further contended that the demand raised using the extended period was not sustainable due to the absence of suppression of facts. They pointed out that the department was aware of the duty payment on capital goods removal, as reflected in the ER-1 return and highlighted during an audit in 2010. Despite this, the show cause notice invoking the extended period was issued in 2013. The appellant argued that the demand was time-barred and cited multiple judgments to support their stance.

Issue 3: Invocation of extended period of limitation
The Revenue reiterated the findings of the impugned order, but upon careful consideration, the tribunal decided to dispose of the appeal solely on the issue of time-bar without delving into the merits of the case. The tribunal observed that the appellant had cleared capital goods paying excise duty at the prevailing rate, which was duly recorded in their ER-1 return. The tribunal noted that the issue was raised by the audit party in 2010, indicating the department's awareness, yet the show cause notice was not issued within the normal period. The tribunal found no suppression of facts or intent to evade duty payment by the appellant, leading to the conclusion that the demand was time-barred under the extended period of limitation.

In conclusion, the tribunal set aside the demand solely on the ground of time-bar, emphasizing the absence of suppression of facts and the revenue neutrality aspect of the case. The appeal was allowed, and the impugned order was overturned.