Case Law Details
Emami Paper Mills Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
CESTAT held that mere statement in the Order-In-Original dated 08.06.2016 that the appellant had suppressed material facts from the Department and that the purported contravention had been detected only during audit was insufficient justification for invoking the extended period of limitation.
the evidences on record do not show that the appellant had acted otherwise than in a bona fide manner. It is not disputed that the details regarding availment and utilization of the disputed credit had been disclosed in the appellant’s Central Excise returns filed with the Department. The issue of purported illegal utilization of credit had come to the Department’s knowledge as far back as in the year 2013 while conducting audit. Yet, the show cause notice had been issued belatedly and only in the month of February, 2015. The defence of limitation had been specifically canvassed by the appellant in its appeal petition before the Commissioner (Appeals), who failed to apply his mind independently to the facts of the case and examine the said issue properly. As such, CESTAT do not see any reason to sustain the invocation of extended period of limitation against the appellant.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The instant appeal has been preferred by the appellant-assessee against an Order-In-Appeal dated 28.12.2017 passed by the Commissioner (Appeals), CGST, CX and Customs, Bhubaneswar. Vide the said impugned order, the Commissioner (Appeals) upheld the Order-In-Original dated 08.06.2016 passed by the Additional Commissioner, Central Excise, Customs and Service Tax, Bhubaneswar-II and confirmed the disallowance of Cenvat Credit of Rs. 9,08,676/- for the period 2011-12 and 2012-13 against the appellant-assessee with interest and equivalent penalty under various provisions of the Central Excise Act, 1944 (hereinafter referred to as “Act”) read with the Cenvat Credit Rules, 2004 (hereinafter referred to as “Rules”).
1. Briefly stated, the facts of the case are as follows:-
a. The appellant is engaged in the manufacture and sale of writing paper and printing paper, newsprint, etc. falling under Chapter 48 of the First Schedule to the Central Excise Tariff Act, 1985. For manufacture of the said final products the appellant procured inputs and availed Cenvat Credit of Central Excise duty as well as Education Cess (hereinafter referred to as “E Cess”) and Secondary and Higher & Education Cess (hereinafter referred to as “SHE Cess”). The Cenvat Credit so availed was utilized by the appellant in due course.
b. On 20.12.2013 an audit memo was issued upon the Appellant by the Superintendent (Audit), Central Excise, Customs and Service Tax, Bhubaneswar-I, pursuant to an audit conducted by the Department for the period 2011-12 and 2012-13 (hereinafter referred to as “relevant period”).The said audit memo alleged that the appellant had wrongly utilized Cenvat Credit of Central Excise duty of Rs. 9,08,676/- towards payment of E Cess and SHE Cess, thereby leading to contravention of Rule 3(7)9(b)(iii), (iiia), (vi) and (via) of the Rules read with the first and second provisos.
c. The Appellant contested the audit objection vide its detailed reply dated 30.09.2014. Principally, it was the appellant’s contention that there was no bar under the Rules in respect of utilization of Cenvat Credit of basic Excise Duty for discharge of E Cess and SHE Cess.
d. Show cause notice dated 19.02.2015 was issued, proposing recovery of Cenvat Credit of Rs. 9,08,676/-under Rule 14 of the Rules read with the proviso to Section 11A(1) of the Act, for illegal utilization of basic Excise Duty credit towards payment of E Cess and SHE Cess. The said show cause notice also proposed imposition of interest and equivalent penalty.
e. The Appellant filed its reply dated 24.03.2015 against the aforesaid show cause notice and contested the proceedings. Written submissions dated 17.03.2016 were also filed before the adjudicating authority.
f. Vide an Order-In-Original dated 08.06.2016 the adjudicating authority confirmed the purported demands against the Appellant.
g. Aggrieved by the aforesaid adjudication order the Appellant preferred an appeal before the Commissioner (Appeals) which came to be rejected vide the impugned Order-In-Appeal dated 28.12.2017.
h. Dissatisfied with the above Order-in-Appeal dated 28.12.2017, the appellant filed the present appeal before this Tribunal.
2. The Ld. Advocate for the Appellant assessee made the following contentions and submissions:
I. The Commissioner (Appeals) failed to appreciate that Rule 3 of the Rules nowhere prohibited the utilization of basic excise duty credit towards payment of E Cess and SHE Cess. Rule 3(7) of the Rules restricted utilization of Cess credit for payment of Central Excise duty and not vice versa. Consequently, the respondent-revenue had grossly erred by placing reliance on clauses (iii), (iiia), (vi) and (via) of Rule 3(7) (b) of the Rules read with the first and second proviso thereto.
II. An assessee was eligible for utilizing Cenvat Credit of basic Central Excise duty for discharge of E Cess and SHE Cess liabilities in terms of Rule 3(4)(a) of the Rules. E Cess and SHE Cess were nothing but ‘duty of excise’. A true and proper interpretation of Sections 91-95 of the Finance (No. 2) Act, 2004 and Sections 136-141 of the Finance Act, 2007 supported the appellant’s stand.
III. The revenue’s reliance on the decision of CC and C. EX –versus – Bharat Box Factory Ltd., 2011 (265) ELT 366(T) was misplaced since the said decision had been rendered in the context of availment of benefit under Notification No. 56/2002-CE dated 14.11.2002. The said decision was wholly distinguishable on facts and in law. In any case, the said decision should not be read as laying down the correct law in view of the following decisions in favour of the assessee:-
a) Commissioner of Central Excise, Customs & Service Tax, Vapi -versus- M/s Madura Industries Textiles, 2012-TIOL-1094-HC-AHM-CX;
b) Rama Cylinders Pvt. Ltd. –versus- Commissioner, 2016(339) ELT 147(T) ————– Commissioner –versus- Rama Cylinders Pvt. Ltd., 2016(339) ELT A52 (Guj.);
c) Commissioner of C. Excise –versus – PragBosimi Synthetics, 2013(295) ELT 682(Gau.);
d) Union of India –versus- Kamakhya Cosmetics & Pharmaceutical, 2015(323) ELT 33(Gau.);
e) DharampalSatyapal Ltd. –versus- Commr. of Cus. & C. Ex. Shillong, 2015(323) ELT 55(Gau.);
f) M/s DharampalSatyapal Ltd. –versus- Commissioner, 2017-TIOL-4124-CESTAT-KOL;
g) Indian Steel Corporation Ltd. –versus- Commissioner of C. EX & S. T., Rajkot, 2018(360) ELT 137(T) ——Commissioner –versus- Indian Steel Corporation Ltd., 2018(360) ELT A34 (Guj.);
h) Asia Motor Works Ltd. –versus- Commissioner, 2016 (338) ELT 419(T)——- Commissioner –versus- Asia Motor Works Ltd., 2016(338) ELT A135 (Guj.);
i) M/s Vedanta Ltd. –versus- Commissioner of Central Excise, 2018-TIOL-2521-CESTAT-MAD.
iv) In any event, the extended period of limitation could not have been invoked in the instant case. Firstly, the show cause notice dated 19.02.2015 did not even allege suppression or any specific default on part of the appellant-assessee warranting invocation of the extended period of limitation. In Collector of Central Excise -versus – HMM Ltd., 1995(76) ELT 497(SC), Larsen & Toubro Ltd. –versus- Commissioner of C. EX., Pune-II, 2007(211), ELT513(SC) and Kaur & Singh –versus- Collector of Central Excise, New Delhi, 1997(94) ELT 289(SC), the Hon’ble Supreme Court has emphasized that the extended period of limitation is not invokable unless the show cause notice has specifically stated as to which of the various acts or omissions mentioned in the proviso to Section 11A(1) of the Act has been committed, which is also required to be stated as per the principles of natural justice.Secondly, the case set up in the show cause notice could not have been improved in any manner during adjudication. Thirdly, all the necessary details regarding availment and utilization of Cenvat Credit had been disclosed in the monthly Central Excise returns duly filed by the appellant. In such circumstances, there was no rational at all for sustaining demands under the extended period of limitation.
3. Shri K.Chowdhury, Ld.Authorized Representative for the respondent-Revenue re-iterated the findings and observations in the impugned Order-In-Appeal and prayed for dismissing the instant Appeal.
4. I have perused the case records carefully and taken note of the submissions urged on behalf of each side, including the written submissions filed by the appellant. The moot issue involved in the present appeal is whether basic Central Excise duty credit can be utilized for payment of E Cess and SHE Cess. Although extensive arguments have been advanced by both parties with respect to the merits of the matter, in my opinion, the present appeal may be disposed of on the short point of limitation.
5. There can be no doubt that the purported demands against the appellant could have been confirmed only if the invocation of extended period of limitation was proven to be legal and justified. Upon perusal of the show cause notice dated 19.02.2015 it is clear that no allegation had been framed that the appellant had suppressed material facts from the Department or that the appellant had committed any specific default warranting invocation of the extended period of limitation. Thus, the appellant was never put to notice as to which of the various acts or omissions mentioned in the proviso to Section 11A(1) of the Act had been committed by it. In such a situation, I am compelled to hold that the invocation of extended period of limitation was totally contrary to law. In the case of HMM Ltd., supra, the Hon’ble Supreme Court had observed that limitation for extended period was not invokable unless the show cause notice contains an averment specifically pointing out which of the various commissions or omissions stated in the proviso to Section 11A(1) of the Act had been committed by the assessee. To the same effect are the decisions of Larsen & Toubro Ltd., supra and Kaur & Singh, supra.
6. I agree with the submissions of the learned Counsel for the appellant that the revenue’s case could not have been improved during adjudication and a mere statement in the Order-In-Original dated 08.06.2016 that the appellant had suppressed material facts from the Department and that the purported contravention had been detected only during audit was insufficient justification for invoking the extended period of limitation. Thus, there being no clear and explicit allegation against the appellant in the show cause notice with regard to suppression of facts or fraud or wilful mis-representation or intentional evasion of duty, it automatically follows that the purported show cause proceedings against the appellant were barred by limitation.
7. I also find that the assessee could not have been faulted for its conduct, even if it were to be held that cross utilization of basic Excise Duty credit for payment of E Cess and SHE Cess was prohibited under the Rules. In the case of M/s Madura Industrial Textiles, supra, the Hon’ble Gujarat High Court had considered the issue and ruled in favour of the assessee. The appellant had specifically relied upon the said decision of the Hon’ble Gujarat High Court in its reply to the audit proceeding. The issue raised was, at best, debatable and involved interpretation of various provisions of the Rules and the Act. It is also to be noted that the appellant’s stand was sought to be rejected at the time of adjudication by placing reliance upon the decision of M/s Bharat Box Factory Ltd., supra. However, it cannot be accepted that the said decision of Bharat Box Factory Ltd., supra had settled the issue in favour of the revenue and against the assessee, in view of the several decisions rendered by this Tribunal as well as the Hon’ble High Courts being the decisions at Sl. Nos. 5-16 of the Compilation submitted by the appellant. In view of the aforesaid, there remains no iota of doubt that the issue involved in the present appeal was a pure interpretational question.
8. Further, the evidences on record do not show that the appellant had acted otherwise than in a bona fide manner. It is not disputed that the details regarding availment and utilization of the disputed credit had been disclosed in the appellant’s Central Excise returns filed with the Department. The issue of purported illegal utilization of credit had come to the Department’s knowledge as far back as in the year 2013 while conducting audit. Yet, the show cause notice had been issued belatedly and only in the month of February, 2015. The defence of limitation had been specifically canvassed by the appellant in its appeal petition before the Commissioner (Appeals), who failed to apply his mind independently to the facts of the case and examine the said issue properly. As such, I do not see any reason to sustain the invocation of extended period of limitation against the appellant.
9. Accordingly, the Appeal is disposed of on the point of limitation. It is held that the purported disallowance of Cenvat Credit of Rs. 9,08,676/- against the appellant is illegal and unjustified. The confirmation of interest and equivalent penalty under Section 11AB/AA of the Act and Rule 15 of the Rules respectively is also held as unsustainable. In the result, the present Appeal is allowed with consequential reliefs, if any, and the impugned Order-in-Appeal dated 28.12.2017 is set aside.
(Order pronounced in the open court on 02 November 2022.)
