Case Law Details
Hyundai Motors India Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
It has merely stated that the fact of non-payment would not come to notice but for the verification of the audit department. In the absence of any specific allegation and proof that the appellant has suppressed facts, the extended period cannot be invoked.
In the Show Cause Notice, there is no specific allegation that the appellant has willfully suppressed or mis-represented the facts with intention to evade payment of duty. The allegation in the Show Cause Notice is as under:-
“The said amount of duty has been short-paid on account of non-reversal as per the provisions of Rule 3(5) of CCR, 2004. The fact of non-reversal of cenvat credit of Additional duty (4%) originally availed was not disclosed to the department and the same would not have come to notice of the department but for the verification done by Audit and the extended time limit under the proviso to section 11A(1) appears invocable for recovery of the said amounts. It therefore appears that the said differential duty is recoverable from the taxpayer under Rule 14 of CCR, 2004 read with proviso to subsection (1) of section 11A of Central Excise Act, 1944.
It has merely stated that the fact of non-payment would not come to notice but for the verification of the audit department. In the absence of any specific allegation and proof that the appellant has suppressed facts, the extended period cannot be invoked. There is no evidence adduced by the department that the appellant has suppressed facts with intent to evade payment of duty. The decisions relied by the learned counsel in the case of Kaur & Singh (supra) apply to the facts of this case. The relevant part of the order is as under:-
“3. This Court has held that the party to whom a show cause notice of this kind is issued must be made aware of the allegation against it. This is a requirement of natural justice. Unless the assessee is put to such notice, he has no opportunity to meet the case against him. This is all the more so when a larger period of limitation can be invoked on a variety of grounds. Which ground is alleged against the assessee must be made known to him, and there is no scope for assuming that the ground is implicit in the issuance of the show cause notice. [See Collector of Central Excise v. H.M.M. Limited, 1995 (76) E.L.T. 497 and Raj Bahadur Narayan Singh Sugar Mills Limited v. Union of India, 1996 (88) E.L.T. 24].”
After appreciating the facts and evidences placed before me, I hold that the appellant succeeds on the ground of limitation. The demand is held to be time-barred.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellants are registered with the Central Excise department as manufacturer as well as warehouse under Rule 9 and Rule 20 of the Central Excise Rules, 2002 read with Notification No. 35/2001-CE(NT) dated 26.6.2001 and No. 46/2001-CE (NT) dated 26.6.2001 as amended.
2. During the audit of accounts of the appellant, it was found that they had cleared imported raw materials ‘as such’ on sale to their vendors and also ‘stock transferred’ to M/s. Mobis India Ltd. on account of business transfer on payment of duty. However, the excise duty paid on such inputs cleared as such was not equal to the CENVAT credit availed thereon inasmuch as the reversal included only CVD and related cess and not the Special Additional Duty (SAD) levied on imported raw materials which was originally availed as credit at the time of import. As per Rule 3(5) of CENVAT Credit Rules, 2004, when inputs or capital goods on which CENVAT credit has been taken, are removed as such from the factory or premises, the manufacturer of the final products has to pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to Rule 9 of CENVAT Credit Rules, 2004. The differential duty arising on account of non-reversal of SAD accrued thus worked out to Rs.5,91,59,994/- for the period from November 2006 to March 2008. The fact of non-reversal of CENVAT credit of SAD originally availed was not disclosed to the department and it would not have come to notice of the department but for the verification done by the audit. Show Cause Notice was issued to the appellant invoking the extended period for recovery of the amount of Rs.5,91,59,994/- along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand of Rs.28,17,475/-being the short-paid duty on account of non-reversal of CENVAT credit in respect of SAD. The said amount was confirmed along with interest and equal penalty was also imposed. The duty demand of Rs.5,63,42,519/- was dropped as it was noted by the adjudicating authority that there was no removal in regard to this amount but only transfer by sale which was covered under Rule 10 of CENVAT Credit Rules, 2004. Aggrieved by such order, the appellants are now before the Tribunal.
3. The learned counsel Shri S.Muthuvenkataraman appeared and argued for the appellant. He submitted that the Show Cause Notice was issued on 23.11.2011 and the appellant had filed detailed reply on 31.5.2012. Thereafter, the adjudication has taken place after a delay of 10 years from the date of issuance of Show Cause Notice. Though the appellant had mentioned in their reply that they had reversed an amount equal to credit and actually have paid amount in excess of the credit availed, they were not able to substantiate the same with documents at the time of hearing. This is because the hearing has taken place after a delay of more than 10 years from the date of issuance of Show Cause Notice. He submitted that the delay in adjudication has always been condemned by the Courts and has consistently held as violation of principles of natural justice. To support his argument, he relied upon the following judgments:-
a. Parle International Ltd. Vs. Union of India – 2021 (375) ELT 633 (Bom.)
b. Shirish Harshavadan Shah Vs. Deputy Director, ED, Mumbai – 2010 (254) ELT 259
c. Cambata Indus Pvt. Ltd. Vs. Additional Director of Enforcement, Mumbai – 2010 (254) ELT 269
d. Meghamani Organics Ltd. Vs. Union of India – 2019-TIOL-1607-HC-AHM-CX.
e. Siddhi Vinayak Syntex Pvt. Ltd. Vs. Union of India – 2017 (352) ELT 455 (Guj.)
f. Apollo Tyres Ltd. Vs. Union of India – 2020 (372) ELT 52 (Guj.)
g. Bright Outdoor Media Pvt. Ltd. Vs. Union of India – 2015 (323) ELT 319 (Bom.)
4. On merits, the learned counsel submitted that the adjudicating authority has erred in observing that the appellants have conceded that the goods are cleared as such and had paid less duty on removal. This finding of the adjudicating authority is contradictory to the submission made by the appellant in their reply to the Show Cause Notice. In para 12 of the reply, the appellant had submitted as under:-
“12. With regard to the removal of imported raw materials “as such” to our vendors, we wish to state that we have paid amounts only in excess of the amount of CENVAT credit availed which is required to be paid as per the provisions of Rule 3(5) of the CCR, 2004”.
5. From the above, it is very much clear that the appellant had stated that they have reversed the credit and actually have paid amounts in excess of the credit availed by them. The details of such reversal was mentioned in their ER-1 monthly returns filed during the relevant period. The said aspect has not been disputed in the Show Cause Notice by the department.
6. The learned counsel also argued on the ground of limitation. The appellants having replied to the Show Cause Notice and also having given the details of reversal of credit in their ER1 returns, they have not suppressed any facts. Further, the Show Cause Notice also does not allege that the appellant has suppressed any facts. The Show Cause Notice vaguely states that the same would not have come to notice but for the verification done by the audit and therefore the extended period of limitation can be invoked. There is no allegation of suppression of facts or willful misstatement in the Show Cause Notice. To support his argument, he relied upon the decision of the Hon’ble Supreme Court in the case of Kaur & Singh Vs. CCE, New Delhi – 1997 (94) ELT 289 (SC) as well as the decision of the Hon’ble High Court of Karnataka in the case of National Cooperative Bank Ltd. Vs. CST (Audit), Bangalore – 2018 (15) GSTL 202 (Kar.). He argued that there is no allegation in the Show Cause Notice that the appellant has suppressed facts with intent to evade payment of duty and therefore the invocation of extended period cannot sustain. He prayed that the appeal may be allowed.
7. The learned AR Ms. Sridevi Taritla supported the findings in the impugned order.
8. Heard both sides.
9. The foremost contention put forward by the learned counsel for appellant is with regard to the delay in adjudication of the Show Cause Notice. As already stated, the Show Cause Notice dated 23.11.2011 has been adjudicated vide order impugned herein dated 21.9.2021. There is a delay of 10 years in adjudicating the matter. It is seen that the appellant had replied to the Show Cause Notice on 31.5.2012. The original authority has dropped demand of Rs.5,63,42,519/- with regard to the slum sales to Mobis India Ltd. Only a demand of Rs.28,17,475/- has been confirmed alleging that the appellant has not reversed the credit in respect of the SAD. When the appellants have given detail reply to the Show Cause Notice and also filed ER-1 returns reflecting the reversal of credit made by them, the confirmation of demand after a period of 10 years alleging that the appellants have not been able to establish the reversal by producing sufficient document is indeed not fair to the appellant. The observation made by the adjudicating authority for confirming the demand is that the appellants have not provided any evidence to show that they have reversed the SAD in respect of the imported materials cleared as such. It is also stated that the reversal shown in ER-1 was verified by Section Officer and found that they have not reversed SAD amount. If the adjudication had happened in close proximity with the reply furnished by the appellant, they would have been in a better position to explain their defence.
10. The Hon’ble High Court of Bombay in the case of Parle International Ltd. (supra) held that the inordinate delay of 13 years in adjudicating the Show Cause Notice is untenable. In the case of Bombay Dyeing Vs. Deputy Commissioner of CGST (W.P. No. 2874/2021) vide judgment dated 14.2.2022, the Hon’ble High Court of Bombay held that the delay of 16years in conducting the adjudication is violation of principles of natural justice. The petitioner in the said case had field reply within four weeks after receiving the Show Cause Notice dated 16.5.2005. The Hon’ble High Court held that it is not expected from the assessee to preserve the evidence / record for such a long period to be produced at the time of hearing of the Show Cause Notice. After replying to the Show Cause Notice, when no response is received from the department with regard to personal hearing, the assessee may be under the legitimate expectation that the reply has been received and accepted by the department.
11. Be that as it may, the learned counsel has argued on the ground of limitation also. In the Show Cause Notice, there is no specific allegation that the appellant has willfully suppressed or mis-represented the facts with intention to evade payment of duty. The allegation in the Show Cause Notice is as under:-
“The said amount of duty has been short-paid on account of non-reversal as per the provisions of Rule 3(5) of CCR, 2004. The fact of non-reversal of cenvat credit of Additional duty (4%) originally availed was not disclosed to the department and the same would not have come to notice of the department but for the verification done by Audit and the extended time limit under the proviso to section 11A(1) appears invocable for recovery of the said amounts. It therefore appears that the said differential duty is recoverable from the taxpayer under Rule 14 of CCR, 2004 read with proviso to subsection (1) of section 11A of Central Excise Act, 1944.
12. It has merely stated that the fact of non-payment would not come to notice but for the verification of the audit department. In the absence of any specific allegation and proof that the appellant has suppressed facts, the extended period cannot be invoked. There is no evidence adduced by the department that the appellant has suppressed facts with intent to evade payment of duty. The decisions relied by the learned counsel in the case of Kaur & Singh (supra) apply to the facts of this case. The relevant part of the order is as under:-
“3. This Court has held that the party to whom a show cause notice of this kind is issued must be made aware of the allegation against it. This is a requirement of natural justice. Unless the assessee is put to such notice, he has no opportunity to meet the case against him. This is all the more so when a larger period of limitation can be invoked on a variety of grounds. Which ground is alleged against the assessee must be made known to him, and there is no scope for assuming that the ground is implicit in the issuance of the show cause notice. [See Collector of Central Excise v. H.M.M. Limited, 1995 (76) E.L.T. 497 and Raj Bahadur Narayan Singh Sugar Mills Limited v. Union of India, 1996 (88) E.L.T. 24].”
13. After appreciating the facts and evidences placed before me, I hold that the appellant succeeds on the ground of limitation. The demand is held to be time-barred. The impugned order is set aside. The appeal is allowed with consequential reliefs if any.
(Pronounced in open court on 06.05.2022)
