The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that the excise demand was time-barred, citing the department’s delay in issuing the Show Cause Notice despite having prior information of the appellant’s Central Value Added Tax (CENVAT) credit reversal.
Hindustan National Glass & Industries Limited, the appellant made an error in claiming CENVAT Credit on capital goods. Instead of taking the permitted 50% credit in the first year, they mistakenly took the entire 100% credit for the excise duty paid on those goods.
After realizing the mistake, the appellant voluntarily reversed the excess CENVAT Credit amounting to Rs. 84,42,848 and reported this correction in their monthly returns on February 24, 2011.
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The Department issued a Show Cause Notice (SCN) on February 28, 2014, for the alleged contravention of Cenvat provisions. The Department contended that the appellant company had wrongly claimed the full 100% credit upfront and sought to recover additional amounts.
After the due process, the Adjudicating Authority dropped part of the demand of Rs. 12,96,486 related to Additional Excise Duty (AED) but it confirmed a balance demand of Rs. 9,84,011.
The authority also ordered the company to pay a significant amount in interest of Rs.94,05,345 and imposed an equivalent penalty of Rs. 94,05,345 under Section 11AC of the Central Excise Act.
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Aggrieved by this decision, the appellant appealed before the Kolkata Bench of CESTAT arguing that they had reversed the excess credit taken on their own upon realizing the mistake. This reversal was reflected in their monthly returns and there was no willful misstatement or suppression of facts.
The appellant’s counsel argued that the Show Cause Notice (SCN) was issued on February 28, 2014, invoking the extended period under the law. Since they had already made the reversal and disclosed it in their returns, the demand was unjustified and time-barred.
The department’s counsel supported the findings of the adjudicating authority.
The two-member bench comprising R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) noted that the appellant had already reversed a major portion of Rs.84,92,848 of the credit on October 21, 2011, and the Department was aware of this fact.
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The tribunal observed that despite knowing about the reversal, the Department waited nearly three years to issue the Show Cause Notice on February 28, 2014.
The tribunal held that no case of suppression of facts could be made out against the appellant as the details of the reversal were properly reflected in their returns, invalidating the justification for invoking the extended period of limitation.
Therefore, the tribunal held the notice was time-barred. The appellant was granted consequential relief as per law and the appellant’s appeal was allowed.
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