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Commissioner Customs Central Excise v/s Rathi Steel & Power Ltd.


Company & Directors' Information:- RATHI STEEL AND POWER LIMITED [Active] CIN = L27109DL1971PLC005905

Company & Directors' Information:- RATHI PRIVATE LIMITED [Active] CIN = U27106DL2005PTC141836

Company & Directors' Information:- RATHI INDIA LIMITED [Active] CIN = U24111RJ1972PLC001847

Company & Directors' Information:- CENTRAL INDIA POWER COMPANY LIMITED [Active] CIN = U40100MH1994PLC084055

Company & Directors' Information:- S. G. POWER AND STEEL PRIVATE LIMITED [Active] CIN = U14290DL2012PTC240718

Company & Directors' Information:- R. S. STEEL AND POWER PRIVATE LIMITED [Active] CIN = U70100CT2009PTC021362

    Central Excise Appeal No. 38 of 2015

    Decided On, 04 May 2015

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MR. JUSTICE ARUN TANDON & THE HONOURABLE MR. JUSTICE SATISH CHANDRA

    For the Appellant: B.K.S. Raghuvanshi, Senior S.C. For the Respondent: Ashok Kumar, Praveen Kumar, Advocates.



Judgment Text

1. Heard Sri B.K.S. Raghuvanshi, learned counsel for the petitioner-department and Sri Ashok Kumar, learned counsel for the respondent-assessee.

2. This Central Excise Appeal has been filed by the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad against the Order No. ST/A/53147/2014-EX (DB) dated 24th July, 2014 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, insofar as it holds that the extended period of limitation was not available to the revenue, as no mala fide can be attributed to the assessee for invocation of the longer period of limitation.

3. The present excise appeal was admitted under order of the High Court dated 24th July, 2014 on the following substantial question of law:

"Whether Tribunal was justified in holding that extended period of limitation under Rule 15 of the Cenvat Credit Rules, 2004 and Section 11(A)(1) of the Central Excise Act, 1944 was not attracted in this case?".

4. Facts relevant for deciding the present central excise appeal are as follows:

"M/s. Rathi Steel and Power Ltd., Industrial Area, G.T. Road, Ghaziabad *hereinafter referred to as the "assessee") is engaged in manufacture of T.M.T./TOR Steel, S.S. Billets, S.S. Flat, M.S. Billet, etc. The assessee is also registered with Central Excise Department and was availing the facilities of Cenvat Credit on items, namely, Shape and Section, M.S. Plate, H.R. Plate, M.S. Channel, Angles, Roughly Shaped, Forged Rolls, Paints and Primer, Aluminum Bar etc. as "capital goods".

5. During the scrutiny of the records of the assessee for the financial year 2005-2006 by the Audit Team of Central Excise, Ghaziabad, it was noticed that the assessee had taken Cenvat Credit on items namely, Shape and Section, M.S. Plate, H.R. Plate, M.S. Channel, Angles, Roughly Shaped, Forged Rolls, Paints and Primer, Aluminum Bar etc. as "capital goods", when which did not appear to be admissible, as the above said items do not fall under the category of "capital goods" as defined under Rule 2 (a) of Cenvat Credit Rules, 2004 (hereinafter referred to as the "Rules, 2004"). It was also noticed that items in question were not covered under the inputs to be used in the manufacture of capital goods or the goods were in the nature of items, which were used in construction of factory shed, building or laying of foundations or making of structure for support of capital goods. Some of the items like paints and primers were used in maintenance and repair of capital goods and therefore, the credit was not available to the assessee.

6. The department in that regard relied upon the judgment of the Apex Court in the case of Vikram Cement v. Commissioner of Central Excise, Indore reported in 2005 (187) ELT 0145 (SC).

7. Accordingly, a show-cause notice dated 22nd April, 2010 was issued to the assessee by the Commissioner of Central Excise, Ghaziabad for demand and recovery of the Cenvat Credit wrongly availed and utilized along with interest in contravention of provisions of Rule 3 read with Rules 4 and 14 of Rules, 2004 read with Section 11A (1) and Section 11AB of the Central Excise Act, 1944 (hereinafter referred to as the "Act, 1944"). The assessee was also called upon to show cause as to why penalty be not imposed under Rule 15 of Rules, 2004 read with Section 11AC of Act, 1944.

8. The department also claimed the benefit of extended period by invoking the provisions of Section 11A (1) of Act, 1944 against the assessee on the ground that the assessee had knowingly and willfully indulged in availment of inadmissible Cenvat Credit on the pretext of capital goods against the items in question and had suppressed vital facts from the department. It had utilized the irregular Cenvat credit so availed for payment of central excise duty against clearance of their finished goods in contravention of the Act, 1944 and the Rules made thereunder.

9. The assessee submitted its reply on 15th November, 2010. It was stated that detail correspondence had been exchanged between the assessee and the department, wherein full facts about Cenvat credit, were disclosed. There had been no deliberate concealment of any material fact. The assessee referred to the letter dated 19th November, 2008 issued by the range office and the reply where-under the details of credit taken by the assessee from time to time were duly communicated to the department.

10. Reference was made to the letter of the Range Superintendent dated 19th November, 2007, which was replied on 30th November, 2007, letter dated 19th September, 2008 issued by the Range Office, which was replied vide letter dated 14th November, 2008. Information asked for in desired format under letter dated 19th November, 2008, which was duly complied with under letter dated 15th December, 2008 and finally a request letter dated 3rd September, 2009 asking for the credit of capital goods being granted, were referred to in support of the said plea.

11. It was the case of the assessee that the department was all along aware about the Cenvat Credit availed of by the assessee during the relevant period. There was no doubt in the minds of the officers of the department about the admissibility of credit claimed by the assessee. The Range Officers visited the factory of the assessee in the last week of December, 2009 for verification. Nothing wrong was pointed out. It is the case of the assessee that an oral observation was made by the range officer at the time of visit to the factory for not agreeing to the claim of cenvat credit. This resulted in issuance of the show-cause notice. The assessee also asked for the report of the range officer and for his reply to be treated as an interim reply. The assessee also asked for the periodical audit reports of the A.G.U.P. Other correspondence entered into for the purpose was also referred to.

12. It was specifically contended that admissibility of the credit on steel items has been in dispute since long. There are various decision of various forums on the same. The Larger Bench of the Tribunal in the case of Vandana Global Ltd. vs. Commissioner of Central Excise2010 (253) ELT 440 for the first time finally denied the credit on these steel items, which are used for supporting structure of foundation of the capital goods. It was further contended that in the facts of the case since none of the items was used for supporting structure of foundation of the capital goods, the credit could not be denied.

13. On 14th January, 2011, a letter was filed by the assessee stating therein that there was no willful act or suppression on their part and therefore, the extended period of limitation cannot be invoked.

14. Opportunity of personal hearing was afforded to the assessee. The Commissioner of Customs, Central Excise and Service Tax vide order dated 19th November, 2011 confirmed the demand of cenvat credit at Rs. 75,61,749/- (BED) + Rs. 1,51,240/- (Education Cess) + Rs. 8286/- (S and H Ed. Cess) along with interest under Rule 14 of Rules, 2004 read with Section 11A (1) and Section 11AB of Act, 1944. Penalty to the tune of Rs. 77,21,275/- was imposed upon the assessee under Rule 15 of Rules, 2004 read with Section 11AC of Act, 1944 for contravention of the provisions of law.

15. Not being satisfied with the order so passed, the assessee filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi being Excise Appeal No. E/847/2011. The Tribunal under the order impugned dated 24th July, 2014 has disposed of the appeal of the assessee with an observation that on merits the availment of the cenvat credit on the items in question stands decided against the assessee as per the order of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. (Supra). But on the ground of limitation the Tribunal has held that since the law had been declared by the Larger Bench under the aforesaid judgment and further since earlier orders were in favour of the assessee, no mala fide can be attributed to the assessee so as to invoke the longer period of limitation. There has been no suppression on the part of the assessee. The Tribunal has proceeded to set aside the demand of Cenvat credit along with penalty except for the demand of a sum of Rs. 54,000/-, which aspect of the matter has also been remanded to the Original Adjudicating Authority for decision afresh.

16. The order of the Tribunal insofar as it holds that on merit issue of availment of cenvat credit on the said items stands decided against the assessee is not in question before us, inasmuch as the assessee has not filed any appeal against the said part of the order of the Tribunal.

17. The issue, which remains to be examined by this Court is as to whether the Tribunal was justified in holding that the extended period of limitation under Rule 15 of Rules, 2004 read with Section 11A (1) of Act, 1944 was attracted in the facts of the case or not.

18. Learned counsel for the department points out that the Tribunal has failed to appreciate that the assessee had knowingly and willfully indulged in availment of inadmissible Cenvat Credit on the pretext of capital goods against the items in question. He suppressed vital facts from the department and utilized the irregular Cenvat credit so availed for payment of central excise duty against clearance of their finished goods. Allegation of suppression of vital facts get supported from the submission of the assessee as made before the authorities to the effect that there was no provision in the Central Excise Law to disclose the details of credits or to submit the duty paying document. The Tribunal has failed to consider that under Rule, 2004, it is the responsibility of the manufacturer to ensure that credit is claimed correctly and proper records in that regard are maintained. From the records it was established that the assessee took nearly two years time i.e. between November, 2007 to September, 2009 to provide the complete information/ details.

19. In support of the plea that the extended period of limitation could be invoked in the facts of the case, learned counsel for the department placed reliance upon following judgments of the Apex Court:

"1. The Commissioner of Central Excise, Visakhapatnam Vs. Mehta and Co., (2011) 184 ECR 46 : (2011) 2 SCALE 322 : (2011) 4 SCC 435 : (2011) 2 SCR 874 : (2011) 2 UJ 902 : (2011) AIRSCW 1536 : (2011) 1 Supreme 763 , and

2. Usha Rectifier Corpn. (I) Ltd. (Presently known as Usha (I) Ltd.) Vs. Commissioner of Central Excise, New Delhi, (2011) 184 ECR 43 : (2011) 3 JT 183 : (2011) 1 RCR(Civil) 843 : (2011) 1 SCALE 416 : (2011) 11 SCC 571 : (2011) 1 SCR 347 : (2011) AIRSCW 1279 : (2011) 1 Supreme 441

20. Learned counsel for the department also referred to the judgment of the Gujarat High Court in the case of Commissioner of Central Excise Vs. Neminath Fabrics Pvt. Ltd., (2010) 179 ECR 201 : (2010) 256 ELT 369 .

21. Sri Ashok Kumar, learned counsel for the assessee on the contrary submits that the legality of the cenvat credit availed of by the assessee on various iron steel items has been settled by the Larger Bench of the Tribunal in the case of Vandana Global Ltd. (Supra), which has been decided on 30th April, 2010, upto that date there were various orders of various forums in favour of the assessee on the subject. Therefore it cannot be said that there has been any deliberate suppression of material fact by the assessee, so as to invoke the extended period of limitation. He referred to the following judgments of the Apex Court:

"(1) Jai Prakash Industries Ltd. v. Commissioner of Central Excise, Chandigarh; 2002 (146) E.L.T. 481 (S.C.), and

(2) Continental Foundation Joint Venture v. Commissioner of Central Excise, Chandigarh-I; 2007 (216) E.L.T. 177 (S.C.)."

22. It is his case that mere omission to give correct information is not suppression of facts unless it was deliberate with a purpose to avoid payment of the duty. According to him, an incorrect statement cannot be equated with a willful mis-statement. It is also submitted that if there was a scope for entertaining a doubt about the view being taken, it necessarily rules out application of Section 11A of the Act, 1944 i.e. extended period of limitation would not be available.

23. We have considered the submissions made by the learned counsel for the parties and have examined the records of the present central excise appeal.

24. At the very outset, we may record that the findings of the Tribunal in the order under consideration qua the cenvat credit having been wrongfully availed of by the assessee on various iron steel items between 1st April, 2005 to 31st December, 2009 is not in dispute. The finding of the Tribunal in that regard against the assessee has become final, as the order has not been subjected to challenge any further by the assessee.

25. We have only to examine as to whether there has been suppression of facts on the part of the assessee in the matter of such wrongful availment of cenvat credit which was legally not permissible or not, so as to see as to whether extended period of limitation would be available to the department or not.

26. It would be worthwhile to reproduce the finding recorded by the Commissioner, Customs, Central Excise and Service Tax, Ghaziabad in paragraph No. 4.1.7, under his order dated 19th November, 2011, on the said aspect of the matter after considering the explanation furnished by the assessee to the show cause notice. The para reads as follows:

"4.1.7. They submitted that since the admissibility of credit on steel items has been in dispute since long, there are number of decisions of various forums on the same and in all such cases, it has consistently been held that so long as the steel items are used for the manufacture/fabrication of items which are capital goods, credit cannot be denied. The larger bench of Tribunal in the case of Vandana Global Ltd. vs. Commissioner of Central Excise2010 (253) ELT 440 , has denied credit on those steel items which are used for supporting structure of foundation of the capital goods. In the instant case since one of the items were used for supporting structure and/or foundation, the credit could not be denied."

27. We find that the reasons so disclosed in the order of the Commissioner have completely been ignored by the Tribunal only on the ground that the law on the legality of the Cenvat credit on the items in questions, has been declared by the Larger Bench in the year 2010 in the case of Vandana Global Ltd. (Supra), therefore, no mala fide can be attributed to the assessee, so as to justify the applicability of the longer period of limitation.

28. In our opinion, the Tribunal is not justified in recording such a finding.

29. From the stand taken by the assessee himself before the Commissioner, as has been noticed in paragraph No. 4.1.7 quoted herein above, we find that the assessee had tried to suggest that the law laid down in the case of Vandana Global Ltd. (Supra) was not applicable in the facts of his case as none of the items were used for supporting structure of foundation and therefore, cenvat credit could not be denied.

30. It is apparently clear that the plea which has now been sought to be raised before the Court that the assessee had bona fide doubts with regard to the availability of cenvat credit on the items in question and that the law in that regard has been settled by the Tribunal in the case of Vandana Global Ltd. (Supra) is clearly an after thought and attempt to improve upon his explanation, as was furnished before the Commissioner wherein the assessee had admitted that steel items had not been used for supporting structure of foundation in any manner.

31. We further find that under Rule, 2004, a burden is cast upon the manufacturer to ensure that cenvat credit is correctly claimed by them and proper records are maintained in that regard.

32. The assessee, in response to the show-cause notice had stated that there is no provision in Central Excise Law to disclose the details of the credit or to submit the duty paying documents, which in our opinion is false and an attempt to deliberately contravene the provisions of the Act, 1944 and the rules made thereunder with an intent to evade the duty.

33. In our opinion, the facts of the present case clearly suggest willful suppression of material facts by the assessee as well as contravention of the provisions of the Act and rules framed thereunder with an intent to evade the demand of duty as would be covered by Clauses IV and V of Section 11A(1) of the Act, 1944. Therefore, the invocation of the extended period of limitation in the facts of the present case is fully justified.

34. Reference may be had to the judgment of the Apex Court in the case of Usha Rectifier Corporation (I) Ltd. (Supra), where-under the Apex Court has held that where the assessee had not disclosed the fact of manufacturing of the goods to the department and the knowledge of manufacture came to be acquired by the department only subsequently and in view of non-disclosure of such information by the assessee and suppression of relevant facts would rightly result in invocation of extended period of limitation. (Reference paragraph No. 12).

35. Similarly in the case of Commissioner of Central Excise, Visakhapatnam v. Mehta and Company (Supra), the Apex Court has explained that where the excisable goods are removed without payment of proper duty of excise, it is explicit that there was an intention on the part of the assessee to evade the payment of duty. (Reference paragraph No. 22)

36. The Division Bench of the Gujarat High Court in the case of Commissioner of Central Excise v. Neminath Fabrics Pvt. Ltd.(Supra) has explained that proviso to Section 11 comes into play only when suppression etc. is established or stands adm

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itted. (Reference paragraph No. 18). 37. So far as the judgment of the Apex Court in the case of Continental Foundation Joint Venture (Supra) relied upon by the learned counsel for the assessee is concerned, the same is clearly distinguishable in the facts of the present case. In the said case, there were various circulars of department operating at different points of time and there was scope for entertaining a doubt about the views expressed by the authorities themselves. It is in this background that the Court had gone to hold that there had been no deliberate suppression. 38. Similarly the judgment of the Apex Court in the case of Jai Prakash Industries Ltd. (Supra) relied upon by the learned counsel for the assessee is also clearly distinguishable in the facts of the present case. In the said case, there were divergent views of the various High Courts, the issue as to whether crushing of bigger stones or boulders into smaller pieces amounts to manufacturer. In these facts, it was held that if the assessee had not taken licence or he did not pay the duty, the extended period of limitation could not be invoked. 39. For the reasons recorded above, we find that the Tribunal under the order impugned is not justified in recording a finding that the extended period of limitation cannot be invoked, inasmuch as from what has been recorded by us herein above, it is crystal clear that there has been suppression of material fact as well as contravention of the provisions of the Act, 1944 and the rules framed thereunder at the hands of the assessee with an intent to evade the demand of excise duty. Therefore, extended period of limitation had rightly been invoked in the facts of the present case. 40. For the reasons recorded above, the substantial question of law as raised is answered against the assessee and in favour of the department. The order of the Tribunal to that extent is hereby quashed. 41. The present central excise appeal is allowed.
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