Admissibility of credit taken on one's own invoice on returned goods - Invocation of extended period of limitation

PJ/Case Laws/2011-12/1288

Case: M/s Rainbow Plastic Industries Vs CCE, Surat

Citation: 2011-TIOL-1029-CESTAT-AHM

Issue:- Credit taken on returned goods on the basis of assessee’s own invoice – entries made in Part-I& part-II of RG 23 A Part II – no mala fide intention – demand of extended period cannot be invoked.

Brief Facts:- Appellants had taken cenvat credit on the basis of its own invoices of the rejected material as per Rule 16(1) of Central Excise Rules, 2001. Further, the appellants had accounted the rejected material in their RG-1 register on 19.06.01 as waste and scrap.

Revenue contended that cenvat credit so taken was wrongly taken and issued a show cause notice to them. The Adjudicating Authority confirmed the demand of Excise duty under erstwhile Rule 571 of the Central Excise Rules, 1944, read with Section 11A of Central Excise Act, 1944, imposed equal penalty upon them under Section 11AC of Central Excise Act, 1944 read with erstwhile Rule 173Q of the Central Excise Rules, 1944 and ordered to recover; the interest under Section 11AB of Central Excise Act.

Appellant are therefore, before the Tribunal in appeal.

Reasoning of the Judgment:- The Tribunal noted that the appellant had contested the case on merits as also on limitation. It was seen that the goods were received factory on 19.06.01 and the credit was availed on 01.07.01. Due entries were made in RG-23A Part-I Register as also in RG-23A Part-II Register.

It was noted that the show cause notice was issued, as a result of audit objection on 29.06.06 i.e. much beyond the normal period of limitation. The Commissioner (Appeals) has not accepted the appellant's plea of, limitation on the ground that they have not filed any D-3 intimation about the receipt of rejected goods.

The Tribunal found that in as much as due entries were made in Part-I and Part-II of RG' 23A, it cannot be held that there was any malafide, suppression or mis-statement on the part of the appellant. It may be a genuine and bonafide dispute on the availability of the modvat credit but the fact of entries having been made in the statutory records reflect upon the bona-fides of the appellant. The notice having been raised beyond the normal period of limitation is barred. Impugned order set aside.

Decision:- Appeal allowed.

Comments:- This is very good decision which says that if the goods are entered in the books then time of limitation can not be invoked. But now the provision has been inserted where the demand can be issued if it is pointed out by audit and are recorded in books of account and lesser penal action under Section 11AC has been proposed for the same. This means that if you enter the transaction in books of account then also penal action under section 11AC can be imposed. This is very drastatic change. Let us see what the tribunal and courts held on the same.

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PJ/Case Laws/2011-12/1288

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