IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1187 of 2011 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question 4 of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= COMMISSIONER OF CENTRAL EXCISE CUSTOMS & SERVICE TAX -
DAMAN - Appellant(s) Versus N R AGARWAL INDUSTRIES (UNIT-3) - Opponent(s) ========================================================= Appearance :
MR RJ OZA for Appellant(s) : 1, RULE SERVED for Opponent(s) : 1, =========================================================
CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI
and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 23/07/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The following substantial question of law was formulated by this court while admitting the present appeal:
““Whether the Tribunal below committed substantial error of law in holding that the assessee was under bonafide belief that the items in question were capital goods for the purpose of Modvat Credit and, therefore, the department was not entitled to invoke extended period of limitation and consequent demand of duty for the extended period of limitation as well as penalty imposed was liable to be set-aside.”
2. We heard learned senior counsel Mr. R.J. Oza, assisted by Learned Advocate Ms. Rujuta Oza for the appellant. Nobody appeared on behalf of the respondent though Rule was served. The office in its report dated 20.07.2012, confirmed that none had entered appearance on behalf of respondents.
3. The facts involved in the appeal were that the respondent assessee was engaged in the manufacture of goods which were excisable goods falling under Chapter 48 of Central Excise Tariff Act, 1985. In course of the audit it was observed that the assessee had availed unutilized cenvat credit to the tune of Rs.7,11,167/-, additional duty on import Rs.33,746/-, education cess Rs.12,283/- and higher education cess of Rs.2,242/- totalling to Rs.7,59,438/-. The cenvat credit availed was in respect of capital goods namely angles, beams, plates, M.S. Channels, sheets, welding rods, etc., which were used for construction of sheds and flooring of the area situated outside the plant area. It was for period from 01.03.2003 to March 2008.
3.1 As per Rule 2(a) of the CENVAT Credit Rules, 2004, the assessee could take and utilize cenvat credit on capital goods, which are used directly or indirectly in the factory premises for the purpose of manufacturing of final product, but cenvat credit is not available in respect of the capital goods used outside the plant area or in an office.
3.2 Since it was found that the assessee had utilized the capital goods for construction in the area outside the plant, a show cause notice dated 05.08.2008 was issued inter alia as to why excise duty, penalty and interest should not be levied for the period in question. The said show cause notice culminated into the order of the adjudicating authority dated 27.02.2009 disallowing the cenvat credit amount to Rs.7,39,438/- under section 11A of the Central Excise Act (hereinafter referred to as `the Act' for the sake of brevity) and imposition of penalty of equal amount plus interest.
3.3 The assessee preferred appeal before the Commissioner (Appeals), Central Excise, who by his order dated 22.01.2010 dismissed the appeal. Therefore, the respondent approached the Tribunal challenging that order. The Tribunal by its order dated 17.02.2011 allowed the appeal, which is the order impugned by the Department in the present appeal.
4. It could be seen from the facts that the period involved during which cenvat credit was wrongfully availed as per the show cause notice was from 01.02.2003 to March 2008. The show cause notice was issued beyond normal period of limitation by invoking the proviso to the Section which permits extension of limitation period in the circumstances and conditions mentioned in the provision.
4.1 It was the explanation of the assessee in response to show cause notice that it was under bonafide belief that it was entitled to cenvat credit as the very issue was decided in their favour by the Tribunal in their own case in N.R. Agrawal Industries Ltd. v. CEC Vapi [2007 (215) ELT 462 (Tri.Ahd.]. On that basis it was submitted that there was no suppression of fact on their part which could justify invocation of longer period of limitation. It was fairly submitted before the Tribunal on behalf of the assessee that subsequently the issue came to be decided against them in case of Vandana Global Ltd. v. CEC [2010 (253) ELT 440 (Tri. L.B.].
5. The Tribunal observed in its impugned order as under:
“3 the period involved is prior to the Larger Bench decision in the case of Vandana Global Ltd. and some of the earlier decisions were in favour of the assessees, the bonafide belief on the part of the appellant that the said items were capital goods for the purposes of modvat credit, has to be upheld. Accordingly, the demand beyond the normal period of limitation is required to be quashed. However, the demand which is within the period of limitation is required to be quantified and upheld.”
6. From the above facts it could very well be seen that the assessee had a decision in his favour and therefore it was reasonable on its part to hold a belief that the cenvat credit was available. It was only subsequently that the issue came to be decided against him. It was hardly a relevant aspect. The assessee acted bonafide and in honest belief that cenvat credit was available. In the facts and circumstances, no intention could be ascribed on the part of the assessee to evade the duty or suppress any fact. In that view, there was no justification in invoking the longer period of limitation beyond the normal period as the conditions therefor were not satisfied. The question formulated does not raise any substantial question of law in view of above facts, findings and discussion. Appeal is devoid of merit.
7. Accordingly, the Tax Appeal is dismissed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.)
(SN DEVU PPS)