H P M Chemicals Fertilizers Ltd Vs Commissioner of Central Excise and Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh allowed the appeal filed by HPM Chemicals & Fertilizers Ltd. against the Order-in-Appeal dated 16.03.2021, which had upheld the Order-in-Original dated 28.03.2018 confirming a demand relating to CENVAT credit availed during 01.08.2012 to 19.01.2014.
The appellants manufactured insecticides, herbicides and fungicides and availed the benefit of Notification No. 56/2002, as amended by Notification No. 01/2010 dated 06.02.2010. They procured inputs from several manufacturers on payment of Central Excise duty and availed CENVAT credit on the basis of invoices. Revenue sought recovery of the credit on the ground that the inputs were supplied by manufacturers availing Notification No. 01/2010, which, during the relevant period, was not covered by the exclusions under Rule 12 of the Central Excise Rules, 2002. A Show Cause Notice dated 01.09.2017 was issued invoking the extended period.
Before the Tribunal, the appellants submitted that the proceedings were barred by limitation. They stated that they had been filing refund claims from time to time along with relevant documents, including invoices, before the jurisdictional authorities. They contended that there was no suppression, fraud, collusion or other conduct warranting invocation of the extended period. They also submitted that the invoices did not indicate that the eight input suppliers were availing Notification No. 01/2010.
The appellants further submitted that their unit had been audited from time to time and relied on an endorsement in the RG-1 Register showing audit activity. They contended that the Show Cause Notice referred to audits of other units while remaining silent about audits of their own unit. Reliance was placed on several Tribunal decisions and the Supreme Court decision in Pragti Concrete Products (P) Ltd. regarding invocation of extended limitation where departmental audits had taken place.
Revenue supported the impugned order and submitted that a subsequently issued notification could not retrospectively extend a benefit that was unavailable during the relevant period. It relied on the Tribunal’s Final Order dated 02.04.2024 in Intex Technologies India Pvt. Ltd.
The Tribunal noted that the appellants had agreed that the matter could be decided on limitation without examining the merits. It found that the Show Cause Notice invoked the extended period, but the ingredients of mis-declaration, suppression, fraud or similar conduct with intent to evade duty were not established. The Tribunal also noted that the appellants’ records had been audited from time to time and that the Show Cause Notice referred to audits of other units while remaining silent about audits of the appellants.
The Tribunal relied on Pragti Concrete Products (P) Ltd., wherein the Supreme Court had considered repeated audits and physical inspections relevant to the finding that suppression could not be established.
The Tribunal further noted that the appellants had submitted invoices along with refund claims from time to time and that the Department had not alleged any endorsement on the invoices showing that the eight suppliers were availing Notification No. 01/2010. It also noted that the Notification had been listed among the exclusions under Rule 12 for some period and was restored by Notification No. 02/2014 dated 20.01.2014.
The Tribunal held that the appellants had reasons to entertain a bona fide belief regarding their entitlement to CENVAT credit and that there was no basis for invoking the extended period. The Show Cause Notice was therefore held to be barred by limitation.
The Tribunal set aside the impugned order and allowed the appeal. It expressly clarified that it was not examining the merits of the CENVAT credit dispute.
Cases Discussed
- Pragti Concrete Products (P) Ltd. (Supreme Court), 2015 (322) ELT 819 (SC)
- Intex Technologies India Pvt. Ltd. (CESTAT Chandigarh), Final Order No.60159/2024 dated 02.04.2024
- Krishi Rasayan Export Pvt. Ltd. (CESTAT), Order No. A/63472/2018-SM (BR) dated 19.11.2018
- Saraswati Agro Chemicals (CESTAT), Final Order No.63159/2018 dated 14.09.2018
- B.R. Agrotech Ltd. (CESTAT), Final Order No. 63319/2018 dated 12.10.2018
- Meghastar Impex, IVAX Paper Chemicals, Jammu & T.K. Paper Mills (CESTAT), Final Order 60928 to 60930 of 2019 dated 06.11.2019
- Dharampal Satyapal Ltd. (CESTAT), Final order No. A/70931-70932/2016 dated 29.09.2016
- WPIL Ltd. (Supreme Court), 2005 (181) ELT 359 (SC)
- M/s SDL Auto Pvt. Ltd. (CESTAT), 2013 (294) ELT 577
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
M/s HPM Chemicals & Fertilizers Ltd., the appellants, manufacture insecticides, herbicides and fungicides; they are availing benefit of Notification No.56/2002 (as amended by Notification No. 01/2010 dated 06.02.2010); the appellants procured inputs from several manufacturers on payment of duty of Central Excise and availed CENVAT credit on the same, on the strength of invoices received. Revenue seeks to recover the CENVAT credit thus availed, during the period 01.08.2012 to 19.01.2014, for the reason that the supplies were from manufacturers availing the benefit of Notification No.01/2010, which was not availed provided any exclusion under Rule 12 of Central Excise Rules, 2002. A Show Cause Notice dated 01.09.2017 was confirmed vide Order-in-Original dated 28.03.2018; on an appeal filed by the appellants, Commissioner (Appeals) vide Order dated 16.03.2021 upheld the Order-in-Original and dismissed the appeal. Hence, this appeal.
2. Shri P.S. Pruthi, learned Consultant for the appellant, submits that learned Commissioner (Appeals) passed the impugned order without considering the written submissions filed by the appellants; exhaustive submissions were also given at the time of personal hearing on 30.05.2019; though, Commissioner (Appeals) again granted personal hearing on23.12.2019; he passed the order without taking into account the written submissions and the submissions made during the personal hearing on 30.05.2019, though, the Commissioner (Appeals) has made a passing reference to the personal hearing held earlier.
3. Learned Consultant submits that the issue is time-barred; the appellants have been filing refund claims over the period of time submitting the relevant copies of documents, including the invoices, before the jurisdictional authorities; therefore, none of the ingredients which are essential to invoke extended period are present in the instant case; the Show Cause Notice does not specify as to which facts were required to be disclosed to the Department and which the appellant did not do so; no suppression, collusions, fraud etc. have been evidenced; the appellants were not aware that the eight units from whom they have procured the raw material were operating under Notification No.01/2010 and the invoices received by the appellants do not indicate any such availment; he relies on the following cases:
- Krishi Rasayan Export Pvt. Ltd. – Order No. A/63472/2018-SM (BR) dated 19.11.2018.
- Saraswati Agro Chemicals – Final Order No.63159/2018 dated 14.09.2018.
- B.R. Agrotech Ltd. – Final Order No. 63319/2018 dated 12.10.2018.
- Meghastar Impex, IVAX Paper Chemicals, Jammu & T.K. Paper Mills (all decided by Tribunal’s Final Order 60928 to 60930 of 2019 dated 06.11.2019.
4. Learned Consultant submits, further, that the audit of the appellant’s unit was conducted for the period December 2012 to February 2015 as indicted by IAD No.128/2015; the RG-1 Register maintained by the appellants contains a certificated dated 20.03.2014 indicating that audit has been conducted for the period prior to December 2012 and for the period January 2013 to February 2014. Learned Consultant further submits that in the instant case, the Show Cause Notice refers to the audit conducted on other units and not on the appellants themselves. He submits that as held by the Hon’ble Supreme Court in the case of Pragti Concrete Products (P) Ltd.- 2015 (322) ELT 819 (SC) that the extended period cannot be invoked when regular audit has taken place. He further submits that Tribunal held in the case of M/s SDL Auto Pvt. Ltd. – 2013 (294) ELT 577 that once the officers have audited the records, they were supposed to examine each and every issue in respect of the appellants for the period of audit. Learned Consultant submits further that Commissioner (Appeals) has gone beyond the grounds taken in the Show Cause Notice to justify the invocation of extended period.
5. Learned Consultant submits that the issue is also decided in favour of the appellants in the case of Dharampal Satyapal Ltd.- Final order No. A/70931-70932/2016 dated 29.09.2016 wherein Tribunal held that there is no prohibition in Rule 3 as CENVAT Credit Rules that the credit is not available if the duty paid on goods, by suppliers of inputs, is refunded to the them subsequently, despite the fact that Notification No.27/2001-CE dated 11.05.2001, which grants refund of NCCD, was not included under Rule 12. He submits that Circular No.977/01/2014 dated 03.01.2014 confirms that Special Area-based Exemptions/ Incentives granted under Notification No.56&57/2002-CE were to continue under the Notification No.01/2010. Learned Consultant would further submit that Government did not have any intention to discriminate between J&K and other States as is evident from the Notification No.02/2014 dated 20.01.2014 which restored the situation as it existed before; the Notification is to be construed as clarificatory in view of Hon’ble Supreme Court’s judgment in the case of WPIL Ltd. – 2005 (181) ELT 359 (SC).
6. Shri Narinder Singh, assisted by Shri Yashpal Singh, learned Authorized Representatives for the Department, reiterates the findings of the impugned order and submits that if the Notification did not exist during a certain period, benefit cannot be extended even though a Notification is issued at a later date giving the same benefit. He relies on the Final Order No.60159/2024 dated 02.04.2024 of this Bench in the case of Intex Technologies India Pvt. Ltd.
7. Heard both sides and perused the records of the case. We find that during the course of the hearing, learned Counsel for the appellants fairly accepts that the instant case may be decided on the issue of limitation without going into the merits of the case. We find that the impugned Show Cause Notice has been issued invoking extended period; at the same time, the existence of the ingredients like mis-declaration, suppression, fraud etc. with intent to evade payment of duty is not established. Learned Counsel for the appellants had successfully placed on record the fact that the records of the appellant were being audited from time to time and that an endorsement to that effect has been made in the RG-1 Register. As submitted by the learned Consultant for the appellants, the Show Cause Notice refers to the audit of other units while being silent on the audit of the appellants themselves. We find that Hon’ble Supreme Court held in the case of Pragti Concrete Products (P) Ltd. (supra) that: it is also found as a matter of fact, that the unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression. We are in agreement with the aforesaid view taken by the CESTAT. As a result, this appeal is dismissed.
8. Further, we find that in the instant case, the appellant has been submitting the invoices along with the refund claims from time to time; it is not the case of the Department that there is endorsement on any of the invoices issued by the eight suppliers to the effect that they are availing exemption under Notification No.01/2010. Moreover, it is on record that for some period, the said Notification remains to be listed under the exclusions under Rule 12; the same was restored by issue of Notification No.02/2014 dated 20.01.2014. Therefore, there are reasons for the appellants to entertain a bona fide belief that they are entitled for CENVAT credit. Under the circumstances, we hold that no case has been made for invocation of extended period. We are of the considered opinion that the impugned Show Cause Notice is barred by limitation and as such the impugned order is liable to be set aside. It is to make amply clear that we are not going into the merits of the case.
9. In view of the above, the appeal is allowed.
(Order pronounced in the open court on 14/08/2024)
