Extended limitation period on issues interpreted differently by different courts

Arising out Order-in-Appeal No. MI/AV/207/2011 dated 19.04.2011 & Order-in-Appeal No. BK/37 & 49/2012 dated 02.08.2012 & 22.08.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai I & IV.

 Brief of the case:

• The CESTAT Mumbai in the case of M/s Aarti Industries Ltd. vs. CCEx, Thane held that wrong availment of Cenvat credit cannot be said to a willful attempt of suppression with the intent to evade the payment of duty when the matter has been interpreted in different manner by different tribunals and courts.
• In that situation, no malafide intention can be attributed on the part of the appellants so as to justify invoking the longer period of limitation.

Facts of the case:

• The assessee is engaged in the manufacture of excisable goods namely bulk drugs classified under Chapter 29 of Central Excise Tariff Act, 1985.It availed the credit of the duty on capital goods namely aluminum coils, S.S. Sheets, plates channels, M.S. angles etc. classified under chapter heading 72.
• During the course of audit, department objected the above mentioned goods are not capital goods eligible for credit under the Cenvat Credit Rules. The department alleged willful suppression with the intent to evade duty. A show cause notice was issued by invoking extended period of limitation.
• By adjudication order the Dy. Commissioner upheld the show-cause notice, which was subsequently also confirmed by the Commissioner. Aggrieved assessee is in appeal before the tribunal.

Contention of the Assessee:

• It was submitted Commissioner passed order without disposing off the contentions of the assessee, such an order being non-speaking is bad in law.He further submitted that aluminum coils, S.S. Sheets, plates channels, M.S. angles etc. Has been used for fabricating process equipments, fabricating reactor vessel etc. Therefore, the same is classified as capital goods.
• It was further submitted that the definition of the capital goods does not require that the capital goods should be used in the process of manufacturing. The only condition is that capital goods should be used in the factory of manufacturer.
• Further, the subject goods were excluded from the purview of the definition of inputs , was added only from 07.07.2009, any credit availed prior to that date is therefore legitimately taken.

Contention of the Revenue:

• The learned counsel for the revenue placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Global Limited vs Commissioner of Central Excise, Raipur wherein the tribunal held that the amendment made in Explanation 2 denying credit was clarificatrory in nature and had retrospective effect. In result would also apply to the period of dispute in the present case even falling before such amendment.

 Held by the CESTAT Mumbai:

• The tribunal observed that the department denied credit because of the exclusion of these items from the chain of Cenvat credit by way of amendment in explanation 2 to Rule 2(a) of the Cenvat Credit Rules, 2004.But the Hon’ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills and the CESTAT Mumbai in the case of M/s. Lloyds Metals and Engg. Ltd held that there is nothing on record to suggest that in the amending Act that amendment made in explanation 2 was clarificatrory in nature. Therefore, respectfully following these decisions credit is allowable. Denial of credit solely on the basis of law laid down by the Larger Bench in the case of M/s. Vandana Global Limited is wrong
• As regards on the point of limitation, tribunal observed that when the same provision of law is subject to various interpretation by different courts & tribunals , then in that situation, extended period of limitation should not be invoked. As in that situation, no malafide intention can be attributed on the part of the assessee so as to justify invoking the longer period of limitation.
• Therefore, the demands were set aside by the tribunal both on merits as well as limitation. In result assessee’s appeal was allowed.