Extended Limitation Period u/s 11A of Central Excise Act not Applicable as Books of Accounts Properly Maintained: CESTAT grants Relief to Coco Cola [Read Order]

In a recent ruling, the Mumbai bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled in favor of Coca-Cola Beverages and held that the extended limitation period under Section 11A of the Central Excise Act, 1944, could not be invoked in this case as the company had properly maintained its books of accounts.

The Audit Wing had interpreted that since the appellants are engaged in the activity of trading, it should be considered an ‘exempted service’ in terms of Rule 2(e) of the CENVAT Credit Rules, 2004, and they should not be eligible to take CENVAT Credit on inputs and input services used for the activity of trading. Based on the above, the central excise duty demand of Rs. 2,34,11,652 was confirmed along with interest, and an equal amount of penalty was imposed, and this was done by invocation of the extended limitation period under Section 11A of the  Central Excise Act.

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The company’s counsel contended that they had already reversed the CENVAT credit of Rs. 56,69,316 based on the department’s audit report, which was appropriated in the impugned order dated 31-12-2013. The appeal was filed challenging the extended period of limitation for demands related to 2007-08 to 2010-11.

The counsel further contended that, in the absence of fraud, collusion, or wilful misstatement, the extended limitation under Section 11A of the Central Excise Act was not applicable. It was further argued that trading was clarified as an exempted service only from 01-04-2011, and hence, the appellants did not reverse the CENVAT credit for the prior period.

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The bench observed that the amendment to Section 2( e ) of the CENVAT Credit Rules, 2004 in which exempted services also included trading was effective only from 01-04-2011.

The bench held that the extended limitation period under Section 11A can only be invoked in cases where there is clear evidence of fraud, wilful misstatement, or suppression of facts, and in this case, the company had maintained a proper book of accounts.

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The CESTAT comprising S. K. Mohanty ( Judicial Member ) and M. M. Parthiban ( Technical Member ) did not find any merit in the impugned order concerning the part in which the revenue passed the order by invocation of the limitation period.

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