CESTAT, BANGALORE BENCH
Commissioner of Central Excise, Mangalore
Ansal Granicom (P.) Ltd.
FINAL ORDER NOS. 154 & 155 OF 2011
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P.G. Chacko, Judicial Member
These appeals filed by the department are directed against two orders of the Commissioner (Appeals). The respondent had imported certain inputs on payment of duties of customs (including CVD) by utilizing DEPB credit. Subsequently, CENVAT credit of the CVD so paid was taken by the respondent in 2003-04 amounting to Rs. 10,33,675/-. Later on, in the face of audit objections, they paid up equal amount with interest thereon under protest. Further, the respondent had also availed CENVAT credit on certain capital goods and had also simultaneously claimed depreciation of the value of these goods under Section 32 of the Income Tax Act. When this irregularity was pointed out by the auditors of the department, an amount equal to the credit taken on the capital goods was paid with interest, which payment was also under protest. Both the payments were made in March 2005.
2. A show-cause notice dated 25.11.2005 was issued to the respondent asking them to show cause to the jurisdictional Assistant Commissioner as to why:
(i) An amount of Rs. 10,33,676/- paid by the assessee towards wrong availment of Cenvat Credit on inputs imported under DEPB scheme should not be demanded and appropriated against the said demand under Section 11A of Central Excise Act, 1944;
(ii) An amount of Rs. 7,14,743/- debited in Cenvat Account by the assessee towards wrong availment of Cenvat Credit on Capital Goods on which depreciation was claimed under Section 32 of the Income Tax Act should not be demanded and appropriated against the said demand under Section 11A of Central Excise Act, 1944;
(iii) Interest of Rs. 5,11,527/- paid by the assessee for the above should not be demanded and appropriated against the said demand under Section 11 AB of Central Excise Act, 1944;
(iv) Penalty should not be imposed on them under Rule 13 of erstwhile Cenvat Credit Rules, 2002 (presently Rule 15 of Cenvat Credit Rules, 2004) and
(v) Penalty should not be imposed on them under Rule 27 of Central Excise Rules, 2002.
3. The above proposals were contested by the party. In adjudication of the dispute, the Assistant Commissioner passed an order vacating the protest of the respondent. Aggrieved by this order, the respondent preferred an appeal to Commissioner (Appeals) and the latter allowed that appeal with consequential relief vide order-in-appeal No.261/2006-CE dated 22.8.2006, which is under challenge in the Revenue’s appeal No. 1056/2006. The Revenue’s second appeal No. 1057/2006 is against a similar order passed by the Commissioner (Appeals) for another period viz., April 2001 to January 2004.
4. After hearing both sides and considering their submissions, we have found no merit in these appeals. The relevant show-cause notices were issued far beyond the normal period of limitation prescribed under Section 11A(i) of the Central Excise Act, without invoking the extended period of limitation. The operative part of one of these show-cause notices has been reproduced hereinbefore. The other show-cause notice is no different. The show-cause notices purported to recover CENVAT credits taken by the respondent, levy interest thereon, and impose penalties. The proposal for recovery of CENVAT credit was made under Section 11A of the Central Excise Act, a provision which was functional part of Rule 14 of the CENVAT Credit Rules, 2004 also. The said Rule expressly provided for invocation of Section 11A of the Act for the purpose of recovery of any CENVAT credit irregularly taken. In an action for such recovery, the procedure laid down under Section 11A of the Act has to be strictly followed. According to this procedure, a demand of duty has to be raised within the normal period of limitation prescribed under Section 11A (1) of the Act. For invoking the extended period of limitation prescribed under the proviso to Section 11A(1) of the Act, the department has to allege and establish fraud, collusion, willful suppression or misstatement of facts or contravention of any provision of law with intent to evade payment of duty, against the defaulter. This did not happen in the present case. The requisite grounds were not raised in any of the show-cause notices for invoking the larger period of limitation. In other words, the proviso to Section 11A(1) of the Act was not invoked. Therefore the entire demand has to be held to be time-barred. This view rightly taken by the lower appellate authority is fully supported by the Hon’ble Supreme Court’s judgment in Kaur & Singh v. Collector of Central Excise 1997 (94) ELT 289.
5. Both the appeals are dismissed.