C.C., C.E. & S.T. vs Dewan Sugar Mills

The appeal by the Revenue arises from an order of the CESTAT, dated 22 January, 2014. The following question of law has been formulated by the Revenue.

"Whether the CESTAT has erred in holding that extended period of limitation is not available without ascertaining the presence of the ingredients specified in Section 11A(4) of the Central Excise Act, 1944."

A notice to show cause was issued to the assessee on 15 March, 2005 by the Additional Commissioner, Customs and Central Excise, Meerut-II. The allegation therein was that between 30 December, 2000 and 31 December, 2001, the assessee had availed of Cenvat credit in the amount of Rs. 21,33,434/- in respect of "staying and structural material" falling under Chapter/Heading No. 7308.90 of the Central Excise Tariff Act claiming them to be capital goods. The assessee had also availed of Cenvat credit in the amount of Rs. 49,802/- on Welding Electrodes under Chapter 8311.10 from 1 March, 2001 and 31 March, 2001. The total Cenvat credit of Rs. 21,83,236/- was, therefore, availed of. The allegation was that the items on which the Cenvat credit was availed of were not capital goods and hence the credit had been wrongly availed of. The extended period of limitation was sought to be applied on the ground that despite a letter of the Superintendent dated 31 October, 2001 and reminders dated 24 December, 2001 and 16 March, 2002, the assessee had failed to submit the requisite statement and it appeared that it had intentionally failed to file the return to avail inadmissible Cenvat credit.

The Adjudicating Officer, in the order dated 17 October, 2005, held as follows:

"I observe that the party availed credit amounting to Rs. 21,33,434.00 on staying & structural material of chapter subheading 7308.90 claiming them as capital goods. The trade name of the structural itself suggests that they are construction/fabrication material. I find that the party in their defence submission has admitted that the material has been used for fabrication. I further observe that the issue of eligibility of Modvat credit on structural material has been squarely dealt with by the Hon''ble Tribunal in DSM Sugar Mills v. CCE, Allahabad (2002 (147) E.L.T. 570 (T)). The Tribunal applied the ratio of Malvika Steel case, wherein it has been held that steel structure used in erecting and fabrication machinery is building material and not capital goods and thus denied the benefit of Modvat in respect of structural material. I, therefore, hold that benefit of Modvat on this structural material is not available to party. The above contention gets further strength from the decision of the Tribunal in CCE, Indore v. LG Hotline CPT Ltd. (2004 (176) E.L.T. 443 (Tri.-Del.)) wherein steel structures have been held as not part/component of the machine and therefore, not eligible for the benefit of capital goods credit. I further observe that the party has raised the issue of limitation and argued that the demand is time barred on the ground that they had filed declaration u/r 57T(1) and 57G on 8-6-2000 & 6-3-2000 respectively. I find that the party has not mentioned Structural material in any of the declarations filed. The demand on the same is therefore not hit by limitation."

The Commissioner (Appeals) dismissed the appeal with the following observations:

"As regards to contention of the appellant that demand in the present case is barred by limitation. I find that the observation made by the adjudicating authority are observe from the relevant records that they had filed Mod vat declarations under Rule 57T(1) of erstwhile Central Excise Rules, 1944 on 6-3-2000 and 8-6-2000. Nevertheless, in none of the said declaration "Structural Material" was declared for the purpose of availing credit. Thus the party suppressed this material fact from the Department and therefore, cannot take the plea of demand being hit by limitation."

The Tribunal has noted the concession of the assessee, in appeal, that the issue of the use of steel items as supporting structures had been decided against the assessee by a Larger Bench of the Tribunal in Vandana Global Ltd. vs. Commissioner of Central Excise,2010 (253) ELT 440 . However, the Tribunal held that the extended period of limitation would not be applicable on the ground that there were decisions in favour of the assessee during the relevant period and the law was declared against it only subsequently by the Larger Bench of the Tribunal. The appeal of the assessee was allowed only on the ground that the extended period of limitation would not apply.

Learned counsel appearing on behalf of the Revenue submits that both in the order of the Adjudicating Authority as well as the first Appellate Authority, it was noted that though the assessee had filed declarations, it had not made any reference to structural material. The Tribunal has not displaced this finding. Moreover, it was submitted that in the case of DSM Sugar Mills v. Commissioner of Central Excise, Allahabad - 2002 (147) E.L.T. 570, the issue had in fact been decided in favour of the Revenue at the material time.

On the other hand, learned counsel appearing on behalf of the assessee has supported the order of the Tribunal and has submitted that the assessee was not bound to make any declaration stating that these items were structures. Learned counsel submitted that it is only the Larger Bench of the Tribunal which resolved the entire issue in 2010 and even now the matter is pending before the Larger Bench of the Supreme Court.

We are of the view that the Tribunal ought to have specifically dealt with the grounds which had weighed with the Adjudicating Authority and the Commissioner (Appeals) in applying the extended period of limitation. Both the authorities have noted that the assessee had made a suppression of fact in regard to the material which was used while filing a declaration and availing Cenvat credit. Without displacing this basic finding of fact, the Tribunal ought not to have, in our view, disturbed the order which was passed.

In this view of the matter, we consider it appropriate in the interest of fairness to restore the proceedings back to the Tribunal for fresh evaluation. In order to facilitate this exercise, we quash and set aside the impugned order dated 22 January, 2014 and restore the proceedings back to the Tribunal. We clarify that we have kept all the rights and contentions of the parties open on the applicability of the extended period of limitation. Similarly, if the Tribunal does come to the conclusion that the extended period of limitation was validly invoked, all the questions on merits are also kept open for adjudication before the Tribunal. In that view of the matter, it is not necessary to answer the question of law as formulated. The appeal is, accordingly, disposed of. There shall be no order as to costs.