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TMI Blog2024 (1) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent return of July, 2008 another availment of CENVAT credit was shown in the return, as the Supreme Court laid down that suppression of fact should not be interpreted as a mere act of omission, therefore, it cannot be held analogous to the fraud. There should have been deliberate act of non disclosure aimed at evading duty. Thus, the extended period under Section 11A(4) would not be available to the department and the show cause should have been issued under Section 11A(1) which permits limitation of only one year, as a result the department should have issued the show cause notice by 6-8- 2009. Whether the shows cause notice dated 7-8-2013 is barred by limitation of five years also? - HELD THAT:- The relevant date in cases not concerning duty on excisable goods shall be date on which duty of excise is required to be paid under the Act or Rules thereunder. In reference to the demand at hand, the entire credit was availed in July, 2008. Therefore, five years should be computed from July, 2008 and according to Rule 8 to the Central Excise Rules, 2002 for date of payment of duty is 6th of every month. Thus, five years commence from 6-8-2008 to 6-8-2013 and show cause n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods CENVAT credit was availed by the appellant. The appellant s plant to commence production of Ferro Alloys got delayed and never got installed until the show-cause notice was issued. 3. The case of the department, in nut shell, was that since the capital goods on which the CENVAT credit was availed were used to manufacture only exempted goods (electricity), therefore, the CENVAT credit was inadmissible in terms of Rule 6(4) of the CENVAT Credit Rules, 2004. The order dated 15-9-2017, which is subject matter of this appeal, upholds the view taken by the Central Excise Department holding that until commencement of the proceedings, manufacturing facility for dutiable goods was not set up, therefore, the credit was inadmissible in terms of Rule 6(4) and is liable to be recovered under Rule 14 read with Section 11A of the Central Excise Act, 2004. 4. By order dated 1-8-2018 the present appeal was admitted by this Court on the following substantial question of law :- i) Whether Rule 14 of the CENVAT Credit Rules, 2004 ('CCR') as in existence during the disputed period conferred jurisdiction and authority to issue the recovery proceedings for credit availed but not u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne as well as physically. He would submit that despite admitted events on record, the department consciously avoided to issue any notice and fall back to the audit proceeding concluded on 12-3- 2012, therefore, the fact of active fraud or suppression with an intent to evade tax does not exist. He would submit that based on such facts, deliberately the department proceeded to apply extended period of limitation of five years and issued the show cause notice on 7-8-2013 whereby the CENVAT credit availed for the period prior to July, 2008 was denied. (iv) Learned counsel would submit that dutiable manufacturing capacity was delayed due to financial instability and market condition and could not be set up till 2017. Subsequently, the wire drawing unit was set up and power generated was used for wire drawing unit and excess was sold outside. According to him, Rule 6(4) restricts credit on capital goods only when capital goods exclusively for manufacture of taxable goods and where the taxable goods are used commonly for taxable goods and exempted goods, Rule 6(4) do not apply. (v) Learned counsel would submit that when the show-cause notice was issued Rule 14 has been amended which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the word taken or utilized , which was subsequently amended with the word and as such the benefit of subsequent amendment cannot be given to the appellant. He would submit that the amendment cannot be applied retrospectively. (b) With respect to limitation, learned counsel would submit that till 2012 the appellant did not disclose that they are selling electricity to outside and only in the year 2012 when enquiry was initiated they get aware about the said fact. He placed his reliance to the decision rendered by the Supreme Court in the matter of Maruti Suzuki Limited Versus Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 to submit that the moment electricity sold outside instead of captive use that would be leviable. With respect to Section 11A of the Central Excise Act, learned counsel would refer to explanation 1(b)(i) and would submit that the date on which the excise duty was required to be paid would be a relevant date and the word excisable goods has been defined under Section 2(d) of Schedule I II, which shows that the electricity is a excisable goods. (c) Learned counsel would also submit that date of filing of return is 10-8-2008. Consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,-- (a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice; (b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,-- (i) his own ascertainment of such duty; or (ii) the duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under Section 11AA. (2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in every month and the CENVAT credit, which was availed by the appellant, was also shown in the return, which is not in dispute. The relevant date has been has been defined in explanation 1(b)(i), (ii) and (iii) of Section 11A of the Central Excise Act, which is quoted below : (b) relevant date means,-- (i) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid, and no periodical return as required by the provisions of this Act has been filed, the last date on which such return is required to be filed under this Act and the rules made thereunder; (ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid and the return has been filed on due date, the date on which such return has been filed; (iii) in any other case, the date on which duty of excise is required to be paid under this Act or the rules made thereunder; xxx xxx xxx 13. Rule 8 of the Central Excise Rules, 2002 postulates that by 6th of every month the duty was payable meaning thereby when the credit was availed in July, 2008 the excise duty is to be paid f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid structural steel items as required under Rule 9 of Cenvat Credit Rules, 2004. Noticee have also not mentioned/shown manufacture of any goods using the aforesaid steel items in their periodical returns filed with the department. As the onus is upon the manufacturer availing cenvat credit to fulfill the aforesaid condition, which they have failed to discharge, the aforesaid cenvat credit taken by them appears to be irregular and liable to be disallowed and recovered. 16. Perusal of the aforesaid contents of the show cause notice, no imagination can be drawn that the respondent was not aware of the fact that the CENVAT credit has been availed by the appellant. 17. The Supreme Court in the matter of P B Pharmaceuticals (P) Ltd. v Collector of Central Excise (2003) 3 SCC 599 : 2003 SCC OnLine SC 253 : 2003 (153) ELT 14 (SC) has held thus at para 12 : 12) We have indicated above the facts which make it clear that the question whether M/s. Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the first show cause notice was issued in 1985 and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly stated in the show cause notice, in absence whereof the Court would be entitled to raise an inference that the case was not one where the extended period of limitation could be invoked. [ See CCE v M/s. Punjab Laminates Pvt. Ltd .] 19. It is well settled proposition that Section 11A(4) is an exception to the general rule and it should be invoked in exceptional circumstances not in a routine manner and specially when the assessee has disclosed everything which is required to disclose under the statute then it cannot be tainted with fraud of suppression of fact. The monthly return which was filed shows the indisputable fact that the appellant has disclosed about availment of CENVAT credit. 20. It is the case of the appellant that he availed CENVAT credit based upon the bona fide belief on the basis of multiple judgment wherein the intent to set up both power plant of manufacture of electricity and plant for manufacture of taxable goods and even if power plant commences production before dutiable capacity the credit on power plant is available. This proposition has been held by the High Court of Karnataka at Bangalore in the case of Commr. of Central Excise, Bangalore v K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paras 8, 14 23 : 8) On the issue of time bar, the CESTAT has held that during the relevant period the Appellant could have entertained a bonafide belief that it had correctly discharged its duty liability in view of the view taken by the Tribunal in the case of IFGL Refractories Ltd. which came to be reversed by this Court only on 9.8.2005. It is relevant to note here that insofar as the decision on time bar is concerned the view of the two learned members who constituted the division bench of CESTAT was unanimous. xxx xxx xxx 14) In the case of Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay2, this Court, while dealing with a similar fact circumstance wherein the extended period of limitation under the abovementioned proviso had been invoked, held that since the expression suppression of facts is used in the company of terms such as fraud, collusion and willful misstatement, it cannot therefore refer to an act of mere omission, and must be interpreted as referring to a deliberate act of non-disclosure aimed at evading duty, that is to say, an element of intentional action must be present. xxx xxx xxx 23) We are in full agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that facility was being set up for generation of electricity and Pig Iron/ Ferro Alloys was given by the appellant and the same declaration was given to the State VAT Department and Department of Industries, therefore, the department was aware of the fact that credit has been availed and no dutiable goods are manufactured through monthly statutory returns, which categorically stated the amount of credit availed and being carried and details of manufacture of goods. Perusal of the record would show that various returns have been filed, which are on record. Therefore, the relevant data was in the knowledge of the department as such suppression on the face of it cannot be alleged. To allege suppression, positive action having mens rea required to be established on the part of the appellant and even mere omission to give correct information cannot lead to conclusion of suppression unless it was deliberate to stop payment of duty. This proposition has been laid down in the matter of Continental Foundation Jt. Venture v Commissioner of Central Excise, Chandigarh-I 2007 (216) ELT 177 (SC). Paras 9 to 12 of the said judgment are quoted below : 9) We are not really concerned with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Act or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement of fact must be wilful. 26. Another aspect of consideration is whether the shows cause notice dated 7-8-2013 is barred by limitation of five years also. The submission of the respondent that relevant date would be reckoned as per clause (i) (ii) of explanation of 1 of Section 11A does not appear to be applicable for the reason that those explanation deal with the cases where dispute is regarding excisable goods and duty thereon. According to us, the relevant provision to determine the relevant date is explanation 1(b)(iii) to Section 11A. The relevant date in cases not concerning duty on excisable goods shall be date on which duty of excise is required to be paid under the Act or Rules thereunder. In reference to the demand at hand, the entire credit was availed in July, 2008. Therefore, five years should be computed from July, 2008 and according to Rule 8 to the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vandana Vidyut Ltd. TAXC No.24 of 2014, is based on the principle laid down in Ind-Swift Laboratories Ltd. (supra) and erstwhile provision of the Cenvat Credit Rules. 30. However, there has been a change/amendment of provision. After the judgment of the Supreme Court in Ind-Swift Laboratories Ltd. (supra) the Government has incorporated new amendment in the Rule 14 of the credit rules 2004. The said amendment in Rule 14 of the Credit Rules was brought in the year 2012 vide Notification No. 18/2012-CE(NT) dated March 17, 2012 (Effective from April 1, 2012). 31. The relevant extract of Rule 14 of the Credit Rules (after amendment on 17th March 2012) effective since 1st April, 2012 is reproduced hereunder: RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.-- Where the CENVAT credit has been taken and utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries. 32. When the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant always has intension to set up a plant with dutiable capacity in which they subsequently succeed in the year 2017. 38. The Supreme Court in State of Haryana v Dalmia Dadri Cement Ltd. 1987 (Supp) SCC 679 held thus in para 9 : 9) We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression for use must mean intended for use If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, goods actually used or goods used. . 39. Therefore, it cannot be said that revenue was right in disallowing credit on co-ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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