Avaialbility of credit on Customs duty & Special Additional duty - plea of knowledge whether can be raised?

PJ/Case Laws/2011-12/1370

Case: COMMR. OF C. EX., HALDIA v/s GANGA ELECROCAST LTD. (STEEL DIVISION)

Citation: 2011 (271) E.L.T. 288 (Tri.-Kolkata.)

Issue:- Availment of credit in respect of Custom duty as well as Special Additional duty – denied – whether plea can be raised that Revenue was aware of irregularities in the year when Audit memos were issued?

Brief Facts:- Respondents were working under CENVAT Scheme. During the period June 2003 to March 2004, Respondents availed credit in respect of Customs Duty as well as Special Additional Duty on the basis of bills of entry. The case of the Revenue is that as per the provisions of CENVAT Credit Rules no credit is permissible in respect of basic Customs Duty and Special Additional Duty. Show Cause Notice was issued on 4-6-2008 demanding duty after denying credit and for imposition of penalty alleging suppression with intent to evade payment of duty.

The Adjudicating Authority confirmed the demand along with interest and also imposed a penalty under Section 11AC of the Act. In appeal, the Commissioner (Appeals) after taking into consideration the Audit Notes issued on 5-4-2006 to 10-4-2006 whereby it has been pointed out by the Audit that Respondent had availed wrong credit held that the Show Cause Notice dated 4-6-2008 is time barred as Revenue was aware of the fact that Respondents had availed the credit when the Audit Notes were issued.

Hence, Revenue is in appeal before the Tribunal.

Appellant’s Contention:- Revenue contended that the findings of the Commissioner (Appeals) regarding time-bar is not sustainable in view of the decision of the Gujarat High Court in the case of CCE, Surat-I v. Neminath Fabrics Pvt. Ltd. [2010 (256) E.L.T. 369 (Guj.)] wherein it was held that suppression is not demolished merely because department acquired knowledge of irregularities.

Respondent’s Contention:- Respondent argued that when the Audit Notes were issued in the year 2006 Revenue was aware of the fact regarding irregularities therefore thereafter it cannot be held that they suppressed the material facts with intent to evade payment of duty. Hence the impugned order is rightly passed. They relied upon the decision of Supreme Court in the case of Nizam Sugar Factory v. CCE, A.P. [2004 (04) LCX 0021]. It was further contended that the decision of the Tribunal in the case of Neminath Fabrics Pvt. Ltd. v. CCE, Surat-I [2009 (234) E.L.T. 525 (Tri.-Ahmd.)]. They also relied upon the decision of the Tribunal in the case of Commissioner of Central Excise, Kolkata-II v. Giriraj industries [2008 (223) E.L.T. 640 (Tri.-Kol.)] against which the Revenue filed Appeal and the same was dismissed by the Calcutta High Court reported at [2009 (242) E.L.T. A84 (Cal.)].

Reasoning of Judgment:- The Tribunal found that that in the Nizam Sugar Factory case, the Supreme Court held that when the first Show Cause Notice was issued all the relevant facts were under the knowledge of the authorities therefore in the subsequent Show Cause Notices allegation of suppression is not sustainable. It was noted that the Respondent relied upon the decision of the Tribunal in the case of Neminath Fabrics which is overruled by the Gujarat High Court reported in 2010 (256) E.L.T. 369 (Guj.). The other decisions relied upon by the Respondent there is no ratio of law laid down whereby the demand was simply set aside on the ground of inaction on the part of Revenue authorities and Appeal against this decision was rejected by the High Court as no specific question of law was involved.

On the other hand, the Tribunal found that the Gujarat High Court in the case of CCE, Surat-I v. Neminath Fabrics Pvt. Ltd. have dealt with the situation where the Revenue was aware of the irregularities and Show Cause Notice was subsequently issued with the allegation of suppression with intent to evade payment of duty.

It was held that the said judgment was fully applicable to the facts of present case and there was no merit in Respondent’s contention that Revenue was aware of the irregularities in the year 2006 when Audit memos were issued, hence the allegation of suppression is not sustainable. Impugned order set aside. Order of the Adjudicating Authority restored.

Decision:- Appeal allowed.

Comment:- This issue has been settled by Gujarat High Court that the show cause notice is not required to be issued from the date of knowledge by the department but if the willful suppression and fraud is deducted then the demand can be issued within five years.

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PJ/Case Laws/2011-12/1370

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