Custom, Excise & Service Tax Tribunal
Purewal And Associates Ltd vs Commissioner Central Excise Goods & ... on 7 January, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 60240 of 2018
[Arising out of Order-in-Appeal No. CHD-EXCUS-001-APP-238-17-18 dated
04.01.2018 passed by the Commissioner (Appeals), CGST, Chandigarh]
M/s Purewal And Associates Ltd ......Appellant
VPO Jabbar, Distt. Solan,
Himachal Pradesh 173225
VERSUS
Commissioner of Central Excise, Goods ......Respondent
and Service Tax, Shimla Commercial Parking Complex, Ground & First Floor, Chhotta Shimla, Shimla, Himachal Pradesh 171002 APPEARANCE:
Shri Joy Kumar, Advocate for the Appellant Shri Yashpal Singh, Authorized Representative for the Respondent CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) FINAL ORDER NO. 60015/2025 DATE OF HEARING: 03.01.2025 DATE OF DECISION: 07.01.2025 The present appeal is directed against the impugned order dated 04.01.2018 passed by the Commissioner (Appeals), CGST, Chandigarh whereby the learned Commissioner (Appeals) has rejected the appeal of the appellant and upheld the order passed by the Adjudicating Authority.
2 E/60240/2018
2. Briefly stated facts of the present case are that the appellant during the material period was engaged in the manufacture of Quartz Analog Wrist Watch Movements falling under Chapter Sub- Heading No. 91 of the Central Excise Tariff Act, 1985 under a valid central excise registration. The appellant was availing Cenvat Credit on the inputs to be used in or in relation to the manufacture of their finished products. During the material period in dispute i.e. 19.02.2001 to 18.02.2003, the appellant availed Cenvat Credit of Rs.9,40,297/- in respect of the rejected finished goods received back from their buyer namely M/s P.A. Pinions, New Delhi who had addressed the letters to the appellant mentioning details of invoice no., date, quantity of the Watch components etc. The department issued a show cause notice dated 19.07.2006 to the appellant on the basis of audit objection proposing central excise duty amounting to Rs.9,40,297/- under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944 by invoking the extended period of limitation of five years on the allegation that the appellant has willfully and intentionally suppressed facts from the department with sole intent to evade payment of duty. Interest under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11AB of the Central Excise Act, 1944 and equivalent penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 were also proposed in the show cause notice. The appellant filed detailed reply to the show cause notice; further the appellant raised the ground of limitation and submitted that the entire demand is barred by limitation. After considering the 3 E/60240/2018 submission of the appellant, the Adjudicating Authority as well as the Appellate Authority has rejected grounds and confirmed the entire demand. Hence, the present appeal.
3. Heard both the parties and perused the material on record. 4.1 The learned Counsel appearing on behalf of the appellant submits that as per the Cenvat Credit Rules, 2002, Cenvat Credit was admissible to the appellant in relation to the goods which have been rejected and received back from the buyer for re-processing. He further submits that as soon as the goods received back from the buyer being defective, as per the various invoices the date and quantity of Watch Components, being returned on account of defect, were mentioned, the appellant had shown the defective goods returned to the factory in relevant pages of RG 23A Part-I, wherein the appellant had reflected entries of receipt thereof and subsequent issuance to the production area for manufacture of finished products. He further submits that the appellant had also furnished the relevant pages of RG 23A Part-I for the period in dispute with respective monthly returns filed by them before the Superintendent, Central Excise & Customs Range, Deoghat, Solan (H.P.). In support of his submission that the appellant has rightly availed the Cenvat Credit on rejected goods received by them, he relies on the following decisions:
Balmer Lawrie & Co. Ltd vs. CCE, Mumbai - 2016 (343) ELT 1175 (Tri. Mumbai) Subros Ltd vs. CCE, Noida - 2004 (178) ELT 441 (Tri.
Del.) 4 E/60240/2018 CCE, Meerut vs. TIN Manufacturing Company - 2000 (119) ELT 290 (Tri. LB) Jamna Auto Industries Ltd vs. CCE, Delhi-III - 2015 (317) ELT 730 (Tri. Del.) CCE, Vadodara vs. EIMCO Elecon (I) Ltd - 2006 (206) ELT 941 (Tri. Mumbai) Jindal Photo Ltd vs. CCE, Vapi - 2009 (247) ELT 730 (Tri. Ahmd) 4.2 The learned Counsel further submits that the entire demand is barred by limitation because the demand has been raised purely on basis of audit objection without further investigation from the appellant. In support of his submission, he relies on the following decisions:
Kirlosakar Pneumatic Co. Ltd vs. CCE, Pune-III - 2011 (22) STR 121 (Tri. Mumbai) CCE, Hyderabad vs. Inogent Laboratories Pvt Ltd - 2010 (255) ELT 152 (Tri. Bang.) Sahni Strips & Wires Pvt Ltd vs. CCE, Rohtakf - 2012 (283) ELT 418 (Tri. Del.) CCE, Daman vs. Gayatrishakti Paper & Boards Ltd -
2013 (294) ELT 260 (Tri. Ahmd) J S L Industries Ltd vs. CCE, Ahmedabad - 1999 (109) ELT 316 (Tri. Del.) Modipon Fibre Co vs. CCE, Meerut - 2001 (135) ELT 1420 (Tri. Del.) CCE vs. Alstom Projects India Ltd - (2024) 19 Centax 46 (Cal.) Medisray Laboratories P. Ltd vs. Commr of CGST, Kolhapur - 2019 (369) ELT 717 (Tri. Mumbai) 4.3 The learned Counsel further submits that the observations made by the AG Audit (H.P.) during audit of the records were within the knowledge of the department from the date of conclusion of the audit for the financial years 2001 to 2003 and the department did 5 E/60240/2018 not issue the show cause notice for more than three years and further the impugned show cause notice was issued without any investigation conducted by the department from the date of conclusion of audit. He further submits that it has been consistently held by various Courts that when the relevant facts are well within the knowledge of the department, the extended period for raising the demand cannot be applied. In support of this submission, he relies on the following cases:
J S L Industries Ltd vs. CCE, Ahmedabad - 1999 (109) ELT 316 (Tri. Del.) Modipon Fibre Co. vs. CCE, Meerut - 2001 (135) ELT 1420 (Tri. Del.)
5. On the other hand, the learned Authorized Representative for the Revenue defends the impugned order and submits that the appellant has not been able to establish on record that after the receipt of the defective goods, the manufacturing process took place on them and the same was cleared on payment of duty. He further submits that extended period of limitation has rightly been invoked because the appellant was unable to satisfy the department regarding the payment of duty after re-processing the defective goods. He relies on the following decisions:
Akzo Nobel India Ltd vs. CCE & ST, LTU, Bangalore - 2019 (365) ELT 289 (Kar.) Menon Piston Rings Pvt Ltd vs. CCE, Pune-II - 2007 (211) ELT 394 (Tri. Mumbai) Commr of CGST vs. International Tobacco Co Ltd -
2020 (371) ELT 470 (All.) 6 E/60240/2018
6. I have considered the submissions made by both the parties and perused the material on record as well as the decisions relied upon by both the sides. I find that though the appellant has recorded the factum of return of the defective goods in their RG 23A Part-I alongwith the relevant invoices and subsequent issuance of the production area for manufacture of finished products but has not been able to establish that the same were cleared on payment of duty. Further, the appellant has also not strictly followed the procedure as prescribed in Rule 16 of Central Excise Rules, 2002. In the absence of clear proof of payment of duty after re-processing of defective goods, it will be difficult for me to give a concrete finding on the said issue; but as far as extended period of limitation is concerned, I find that the appellant has shown the defective goods returned in RG 23A Part-I and has been regularly filing monthly returns before the department and the department has not raised any objection and only during the course of audit conducted by AG Audit (H.P.) during 06.09.2003 to 29.10.2003 it has been pointed out that the appellant has wrongly taken the Cenvat Credit; and thereafter the show cause notice was issued purely on the basis of audit objection which according to me is unsustainable in view of the decision of the Tribunal in the case of Kirloskar Pneumatic Co. Ltd (cited supra) wherein the Tribunal has held as under:
"........., the show-cause notice was issued purely on the basis of audit objections without the necessary investigation which must precede action under Section 11A of the Act. In this connection, I may usefully refer to two decisions cited by the Counsel,
7 E/60240/2018 viz., (i) Swastik Tin Works v. Collector - 1986 (25) E.L.T. 798 (Tri.); and (ii) Ram Steel Rolling and Forging Mills v. Commissioner - 2006 (204) E.L.T. 87 (Tri.-Mumbai). In the former case, one of the reasons stated by the Tribunal's Special Bench for holding the demand of duty to be unsustainable, was that the demand had been raised on the basis of audit objections and without investigations. In the latter case also, it was found that the demand of duty in question had been raised on the basis of audit objection and without gathering evidence by way of investigation. ............"
7. Further, I find that the appellant has been regularly filing monthly ER-1 returns for the period in dispute declaring the Cenvat Credit admissible to them and therefore, the appellant cannot be accused of suppression of relevant facts when there are series of instructions issued by the CBIC board directing the field officers to scrutinize the ER-1 returns carefully.
8. Further, I find that when the audit was conducted in year 2003, the entire information was within the knowledge of the department from the date of conclusion of the audit, but in spite of that, the show cause notice was issued after a gap of three years without any further investigation conducted by the department from the date of conclusion of audit. It has been consistently held by various Courts that when the relevant facts are within the knowledge of the department, the extended period for raising the demand cannot be applied. In the case of Modipon Fibre Co. (cited supra), it has been held that extended period is not invokable for 8 E/60240/2018 demanding duty for the period subsequent to acquiring knowledge by the Revenue about facts suppressed.
9. In view of the my discussion above, I am of the considered opinion that the entire demand raised by way of issuance of show cause notice is barred by limitation; accordingly, I hold that the appellant's appeal succeeds on limitation without going into the merits of the case, therefore, I allow the appeal of the appellant on limitation alone by setting aside the impugned order.
(Order pronounced in the open court on 07.01.2025) (S. S. GARG) MEMBER (JUDICIAL) RA_Saifi