Commissioner Of CGST And Central Excise Commissionrate Dehradun vs. M/S Rai Bahadur Narain Sugar Mills LTD

Held

The High Court held that no substantial question of law arises from the CESTAT's order. The CESTAT had correctly observed that Rule 6(4) of the Cenvat Credit Rules did not permit credit on capital goods used exclusively in the manufacture of exempted goods, but that credit eligibility is determined by the dutiability of the final product on the date of receipt of capital goods. The Court agreed with the CESTAT that the show cause notice was bad in law for being issued after the period of limitation, as the extended period under Section 11A(4) of the Central Excise Act, 1944, is available only when fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty is established and specifically pleaded. The Court found that the assessee's bonafide belief regarding duty liability did not, by itself, constitute suppression or intent to evade duty. Therefore, the extended period of limitation was not available to the revenue, and the order-in-original was beyond the period of limitation. The appeal was dismissed.

Facts

The Commissioner of CGST & Central Excise Commissionrate (appellant) filed an appeal against an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The respondent, M/s Rai Bahadur Narain Sugar Mills Ltd., availed Cenvat credit of Rs. 44,23,305/- on capital goods used in machinery fabrication. The assessee expanded its plant and machinery and availed area-based exemption. An audit during December 2005 raised remarks regarding Cenvat credit, to which the assessee replied. The assessee contended that credit eligibility should be judged on the date of receipt of goods, when duty was being paid, making Rule 6(4) of Cenvat Credit Rules, 2004 inapplicable. They also argued the demand show-cause notice was time-barred, issued over two years after their reply to audit objections. The adjudicating authority confirmed a demand of Rs. 72,43,029/- with interest and penalties.

Key Issues

1. Whether the Cenvat credit availed on capital goods used in fabrication of machinery is admissible, considering the date of receipt of goods and the applicability of Rule 6(4) of the Cenvat Credit Rules, 2004, as amended, and the dutiability of the final product on the date of receipt of capital goods? 2. Whether the show cause notice issued on 25.04.2008 is time-barred, particularly concerning the invocation of the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944? Petitioner/Appellant's Arguments: The assessee contended that Cenvat credit admissibility should be determined based on the date of receipt of capital goods, during which period they were paying duty, thus making Rule 6(4) inapplicable. They argued that the show cause notice was time-barred, having been issued more than two years after their reply to audit objections. They also relied on the CESTAT's earlier order in Spenta International Vs. CCE: 2007 (216) ELT 133. Revenue/State's Arguments: The revenue contended that the assessee had not declared particulars to the department, which came to know of it only through audit, implying suppression of facts and justifying the extended period of limitation under Section 11A(4). The Commissioner of Appeals held that the question of limitation was a mixed question of facts and law, and the department was entitled to five years in cases of suppression.