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TMI Blog2017 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... Avani S Mehta, Sr. Standing Counsel for the Opponent JUDGMENT ( Per : Honourable Ms. Justice Harsha Devani ) 1. By this appeal under section 35G of the Central Excise Act, 1944 (hereinafter referred to as the Act ), the appellant assessee has challenged the order dated 4th August, 2006 passed by the Customs, Excise and Service Tax Appellate Tribunal, Mumbai (hereinafter referred to as the Tribunal ) in Appeals No.E/568/2006 and E/569/2006. 2. By an order dated 10th July, 2007, this appeal had been admitted on the following substantial question of law:- Whether on the facts and circumstances of the case, the CESTAT is correct in holding that the demand raised by the Show Cause Notices dated 06.12.2004 and 07.12.2004 is not barred by limitation under the proviso to Section 11A of the Central Excise Act, 1944? 3. The facts stated briefly are that the appellant assessee is engaged in the manufacture of pharmaceutical products falling under Chapter XXX of the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the CETA, 1985 ) and was availing of the benefit of Cenvat facility as prescribed under the erstwhile Central Excise Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sage of the capital goods on which capital goods credit was being availed. According to the adjudicating authority, the unit was under Self Removal Procedure (SRP) and thus, it was incumbent upon it to understand that the goods were not eligible as capital goods and should have refrained from taking credit, however, it chose to do so and knowingly and willingly contravened the provisions of rule 57Q of the rules. That in view of the suppression of facts by the assessee, the proviso to section 11A(1) of the Act read with rule 57U of the erstwhile rules was invocable in this case. He further found that the assessee had irregularly availed of cenvat credit by resorting to suppression of material facts from the Department and was liable for penalty under section 11AC of the Act read with rule 173Q(bb) of the rules (now rule 25 of Central Excise Rules, 2002). Accordingly, the adjudicating authority ordered that cenvat credit on capital goods amounting to ₹ 10,54,934/- be recovered from the assessee under the provisions of rule 57U of the rules (now rule 12 of the CENVAT Credit Rules, 2002) read with the provisions of section 11A of the Act. The adjudicating authority further impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have been noticed at the time of defacing of the documents. Thus, there was a clear lapse on the part of the departmental officers. The Commissioner (Appeals) was of the view that while defacing the invoices, if the Department had any doubt about the admissibility of cenvat credit on capital goods from the description and tariff heading given in the said invoices, they could have conducted inquiry about it and issued demand for irregular taking of credit within the prescribed time limit under section 11A of the Act. As regards suppression of fact on account of non-disclosure of usage of capital goods, the Commissioner (Appeals) found that the same was irrelevant as the only condition for usage of capital goods during the relevant period was that it should be used in the factory of manufacture of specified final goods. Thus, there was no need for the appellants to disclose the usage of capital goods before taking credit thereon and the allegation of suppression on this ground was not sustainable. Placing reliance upon the decision of this court in Apex Electricals Private Limited v. Union of India, 1992 (61) ELT 413 (Gujarat), for the proposition that information not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no suppression on the part of the assessee and there was no requirement on the part of the assessee to declare the usage of goods. Under the circumstances, the Commissioner (Appeals) had rightly held that the show cause notice was time-barred. Referring to the impugned order, it was pointed out that while the Tribunal had partially allowed the appeal and remanded it to the Commissioner (Appeals) with a direction to rehear the respondents and thereafter decide the issue in the notice dated 7th December, 2004 afresh, it has already held that the ground that the demands were barred by limitation, cannot be upheld. It was, accordingly, urged that the impugned order passed by the Tribunal deserves to be quashed and set aside and the question is required to be answered in favour of the assessee. 7.1 In support of his submissions, the learned advocate placed reliance upon the decisions of the Supreme Court in the case of Anand Nishikawa Company Limited v. Commissioner of Central Excise, Meerut, 2005 (188) ELT 149 (SC), for the proposition that suppression of facts can only have one meaning, that the correct information was not disclosed deliberately to evade payment of duty, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was issued, all the relevant facts were in the knowledge of the authorities. While issuing second or third show cause notices, same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already within the knowledge of the authorities. It was submitted that in the present case, two show cause notices had been issued, one on 6th December, 2004 and the other on 7th December, 2004. It was submitted that, therefore, the second notice dated 7th December, 2004 would be squarely covered by the above decision. 8. Opposing the appeal, Ms. Avani Mehta, learned senior standing counsel for the respondents, submitted that in the present case, the assessee availed of credit on the capital goods on a self-assessment basis and, therefore, ought to have properly verified the heading under which the same would fall before availing of credit in respect of capital goods in question. It was submitted that on a plain reading of rule 57Q of the rules, it is evident that none of the capital goods on which the assessee had availed of Modvat credit were so eligible. Attention was invited to the show-cause notice issued by the respondent to point out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the assessee availed Modvat credit do not meet with the description of capital goods enumerated under rule 57 of the rules. However, it has been submitted on behalf of the assessee that sub-item No.2 of Serial No.1 of the table provides for components, spare parts and accessories of the goods specified at Serial No.1, namely, goods falling under Chapters 80, 82, 84, 85 and 90. The assessee, therefore, was under the bona fide belief that the capital goods in question were covered by Item No.2 of Serial No.1 of rule 57 of the rules. On a perusal of the material which has come on record, it appears to be an admitted position that along with the invoices of the capital goods, the appellant-assessee had also submitted the monthly excise returns. From the findings recorded by the Commissioner (Appeals), it appears that there was no obligation cast upon the respondent assessee to state the usage of the capital goods in question. Accordingly, the assessee had submitted copies of invoices on which it had availed of Modvat credit during the course of the month together with the monthly excise returns. As can be seen from the order passed by the adjudicating authority, according to it, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question. Therefore, the fact that the assessee had availed of Modvat credit on the capital goods in question was well within the knowledge of the Department, however, no action was taken at the relevant time. Furthermore, the Commissioner (Appeals) has observed that during the relevant time the heading number of the item and its description were sufficient to ascertain whether the item is covered as capital goods or not. These two would constitute relevant and necessary information required to ascertain the correctness of the claim of the capital goods. The fact that none of the heading under which the goods were procured were eligible for capital goods credit during the relevant period, was clearly visible in the invoice and should have been noticed at the time of defacing of the documents. Thus there is a clear lapse on the part of the officers of the Department. In these circumstances, when the description of goods which are required to be treated as capital goods in terms of rule 57Q of the rules is clearly set out thereunder, the officers concerned could have easily verified from the invoices which also refer to the chapter heading number of the goods in question as to wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient for them to ascertain the veracity or otherwise of the claim of the appellant. The officers of the Department failed to examine the admissibility or otherwise of the claim of the assessee and defaced the invoices submitted by the assessee by putting the endorsement Modvat Credit availed under rule 57 which means that the Department was aware that the assessee had claimed Modvat credit in respect of the capital goods in question. When rule 57Q of the rules itself provides for the description of the capital goods which are eligible for credit thereunder, and the invoices submitted by the assessee clearly described the goods on which Modvat credit was claimed, it cannot be said that there was any wilful misstatement or suppression on the part of the assessee nor can it be said that there was any wilful contravention of the provisions of the Act or the rules with the intent to evade payment of duty, as contemplated under section 11AC of the Act so as to enable the respondents to invoke the larger period of limitation. In the above view of the matter, the Tribunal was not justified in setting aside the order passed by the Commissioner (Appeals) and holding that the ground of bar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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