Commissioner of Central Tax Vs ABB Limited (Karnataka High Court)
Summary: Karnataka High Court dismissed the Revenue’s appeal against the CESTAT order which had set aside the extended-period CENVAT credit demand against ABB Limited. ABB was engaged in manufacturing turbo chargers, electric motors and transformers and also provided taxable output services. A show cause notice dated 23.04.2010 alleged that ABB was additionally engaged in trading electrical goods and had wrongly utilised CENVAT credit relating to its trading activity. The notice proposed recovery of Rs.5,68,00,000/- under Rule 14 of the CENVAT Credit Rules, 2004 read with the proviso to Section 73 of the Finance Act, 1994 and the proviso to Section 11A of the Central Excise Act, 1944.
CESTAT had held that there was no suppression of facts by ABB with an intention to evade tax. It consequently set aside the demand for the extended limitation period and confirmed the demand only for the normal period. The penalty relating to the normal period was also set aside because there was considerable confusion during the relevant period regarding availment of CENVAT credit in respect of trading activities.
Before the High Court, the Revenue contended that ABB had not declared its trading activities in its returns and that the Department came to know about them only through an intelligence report. ABB countered that the show cause notice itself was based upon its balance sheet, in which all its activities had been truly disclosed. It also pointed out that trading activity was brought within the relevant CENVAT framework with effect from 01.03.2011 through Notification No.3/2011-CE(NT). The CENVAT Credit Rules, 2004 were amended through that notification as part of the 2011 changes.
