Introduction: The recent case of C.C.E. Ahmedabad-I vs. Chiripal Industries Limited saw the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Ahmedabad ruling in favor of the respondent, Chiripal Industries Limited. The core issue revolved around the demand for Cenvat credit on capital goods, with the CESTAT highlighting the importance of suppression of facts in such cases.
Detailed Analysis: Chiripal Industries Limited, engaged in the manufacturing of polyester filament yarn, faced a demand for Cenvat credit on a power plant installed under an EPCG license. The dispute arose as the Department argued that the credit availed in 2012-13 was incorrect under Rule 2(a)(A) of Cenvat Credit Rules, 2004. The contention was that the power plant, installed outside the factory for captive use, did not qualify as capital goods.
The Department further claimed that an amendment on April 1, 2011, made the duty paid on such capital goods eligible for Cenvat credit, but Chiripal Industries had availed credit before this amendment. A show cause notice dated March 31, 2015, demanded Cenvat credit for the period June 2012 to December 2012, invoking the extended period.
The respondent’s defense emphasized that the capital goods were owned by them, installed at Nandan Exim Limited’s factory premises, and that they had informed the Department about the credit availed. The issue of limitation was crucial, with the CESTAT observing that the demand was made more than two years after the credit was taken.
The Tribunal reviewed the evidence, including correspondence and a certificate issued by the Deputy Commissioner, acknowledging the installation of capital goods at Nandan Exim Limited. The discrepancy in the address was deemed inconsequential, as the Department was informed about the installation.
The CESTAT concluded that there was no suppression of facts on Chiripal Industries’ part. As the demand was made beyond the normal one-year period, the Tribunal held it to be wrongly invoked under the extended period. Citing the precedent of Vikram Cement Limited, the CESTAT dismissed the Revenue’s appeal, asserting that even without delving into the merits, the demand was unsustainable on the grounds of limitation alone.
Conclusion: In a significant ruling, CESTAT Ahmedabad sided with Chiripal Industries Limited, emphasizing the importance of timely demands and the absence of suppression of facts. The decision serves as a precedent, highlighting the need for authorities to act promptly in such matters and reinforcing the principle that demands beyond the statutory period may not be sustainable, even without delving into the merits of the case.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the respondent are engaged in the manufacturing of polyester filament yarn classifiable under Chapter heading 5402 of Central Excise Tariff Act, 1985 and are registered with Central Excise Department having registration no. AAACC8513XM001 dated 18.11.2009. During the course of audit and further inquiry by the Preventive Section, it was revealed that the respondent had procured capital goods for installation of power plant under EPCG license in the year 2008. The said power plant was installed during July 2008 to September 2010. The respondent had availed cenvat credit of Rs. 1,19,82,513/- in the year 2012-13 on the power plant under the category of capital goods (Power Plant) which according to the department was incorrect as per the provision of Rule 2(a)(A) of Cenvat Credit Rules, 2004. As the power plant was installed outside the factory for generation of electricity for captive use which was not permissible as capital goods. The department also contended that the rules were amended on 01.04.2011 after which the duty paid on such capital goods used in the captive power plant installed outside the factory was made eligible for cenvat credit whereas the respondent had availed cenvat credit only after the amendment was done. On the above contention a show cause notice dated 31.03.2015 was issued demanding the cenvat credit on such capital goods which was availed during the period June 2012 to December 2012 invoking the extended period. While adjudicating the above show cause notice, the adjudicating authority dropped the proceedings against all the notices. Being aggrieved by the order in original dated 01.02.2016, the Revenue filed the present appeal.
2. Shri R. K. Agarwal, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the grounds of appeal. He further submits that the respondent had received the capital goods admittedly, during the period from July 2008 to September 2010 even though the credit was taken during the period June 2012 to December 2012 with the provision of Cenvat Credit Rules prevailing at the time of receipt of capital goods shall apply. As per the relevant provision during the period July 2008 to September 2010, the credit on capital goods installed outside the factory for generation of electricity was not allowed. The same was allowed by amendment in Cenvat Credit Rules 2004 vide Notification No. 3/2011-CE(NT) dated 01.04.2011 whereby in Rule 2 in clause (a) in sub Clause (A) after item (1) an Item (1A) was inserted whereby the capital goods installed outside the factory of the manufacture of the final product for generation of electricity for captive use within the factory was allowed which is effective from 01.03.2011, therefore, this provision will not apply in the present case to the appellant as the capital goods were received and installed much before this above amendment made in Cenvat Credit Rules. As regard, the limitation the learned authorized representative referred to the grounds of appeal given in para 21, 22 of the appeal memo.
3. Shri P. P. Jadeja, learned Consultant, appearing on behalf of the respondent reiterates the findings of the impugned order. He further submits that the impugned order-in-original dated 01.02.2016 is passed considering all the relevant submissions on fact and the established law regarding allowing credit of the capital goods in respect of captive power plant. The adjudicating authority has, after consideration of the submission and facts, dropped the proceedings not only on merit but also on limitation which is just, fair, legal and proper and the same does not require any interference by this bench. He submits that the power plant even though installed at Nandan Exim Limited but it is owned by both the units i.e. Nandan Denim Limited and the respondent, therefore, the contention of the Revenue’s appeal that the power plant is installed in different unit is not factually correct. He further submits that there is no dispute that the capital goods which is used for setting up the power plant were purchased by the respondent in their own account, therefore, such capital goods were owned by the Respondent, accordingly, it is wrong to say that the appellant have taken credit on capital goods which is installed in some other entity. He further submits that even though the provision of Rule 2(1A) has come into effect from 01.04.2011 but the credit was admittedly taken in the month of June 2012 and December 2012, therefore, the rule of Cenvat Credit Rules, shall apply as on date of taking credit. Without prejudice, he further submits that even before Rule 2A (1A) was inserted on 01.03.2011 but even by interpreting the existing rules of relevant period, the Hon’ble Supreme Court allowed the credit in the judgment of Vikram Cement Limited 2006 (197) ELT 145 (SC). As regard limitation, he strongly submits that the appellant have categorically informed through their letter dated 30.07.2012 and 10.01.2013 to the department about availment of cenvat credit on the capital goods at Nandan Exim Limited. On their letter even the Deputy Commissioner, Central Excise Division IV-Ahmedabad – I dated 19.04.2011 issued a Certificate regarding installation of capital goods at the factory premises on Nandan Exim Limited, therefore with all the said documents, the fact was very much in the knowledge of the department. Therefore, in absence of suppression of fact, the demand was not sustainable on limitation also. He prays that the impugned order be up held and Revenue’s appeal be dismissed.
4. We have carefully considered the submission made by both the sides and perused the records. After hearing both the sides and carefully perusal of records, we are of the view that the present appeal of the Revenue can be disposed of only on the issue of limitation itself. In this regard, we find that the appellant have informed the department vide their letter dated 30.07.2012 and 10.01.2013 and the departmental Deputy Commissioner has also issued a Certificate all the three documents are scanned below:
From the above correspondence and certificate issued by the Deputy Commissioner of Central Excise-Division-IV, Ahmedabad, it is absolutely clear that the fact about installation of capital goods in the factory premises of Nandan Exim Limited and availment of cenvat credit there on by the Respondent was very much disclosed by the Respondent and was in the knowledge of the department. The appellant also filed their ER-1 return during the relevant period wherein the availment of Cenvat Credit on such capital goods was categorically declared. Therefore, we do not find any suppression of fact on the part of the Respondent. The adjudicating authority, in our view, has correctly considered the fact on demand being time barred. The Revenue in their appeal made a submission that the address of the power plant was wrongly stated in their correspondence, therefore, there is a mis-statement. We find that as per the certificate issued by Deputy Commissioner vide dated 19.04.2011, it can be seen that in the certificate it is clearly certified that the capital goods against EPCG license was installed by the Respondent in the factory of M/s Nandan Exim Limited. With this detail, it was absolutely clear to the department that though the respondent had taken the credit in their factory, i.e. Chiripal Industries Limited, but the capital goods on which the credit was taken were installed at the factory premises on Nandan Exim Limited. Therefore, even though there is some discrepancy in the Plot No./ Survey No. in the address, it was categorically declared to the department that the capital goods were installed in the factory of Nandan Exim Limited. On the basis of this Certificate issued by the department, entire facts of availment of credit on capital goods by the respondent, installation of capital goods at the factory premises of Nandan Exim Limited were in the knowledge of the department. On the basis of such information, the department could have conveniently issued the show cause notice if at all they feel any discrepancy to the appellant will within the normal period of one year. However, in respect of credit taken during June 2012 to December 2012, the show cause notice was issued on 31.03.2015 i.e. more than two years after the date of taking credit. We are, therefore, have no hesitation to hold that the demand was wrongly made under the extended period in the show cause notice. Moreover, the issue relates to interpretation of cenvat provision, the identical issue has been considered by the Hon’ble Supreme Court in the case of Vikram Cement Limited (supra) which is directly applicable to the facts of the respondent’s case. On this basis also malafide intention to avail wrong credit cannot be attributed to the respondent. Therefore, taking into stock of the above facts, we are of the view that the adjudicating authority has rightly dropped the proceedings on limitation.
5. We are therefore, of the view that even without going into the merit of the case the demand of the cenvat credit is not sustainable on the ground of limitation. Since the demand even on limitation alone is not sustainable, the Revenue’s appeal has no legs to stand. Accordingly, we uphold the impugned order and dismiss the Revenue’s appeal.
(Pronounced in the open court on 03.11.2023)