Extended period of Limitation under Excise Act cannot be invoked When Assesee disclosed Cenvat Credit availed in Monthly ER-1 returns: CESTAT [Read Order]

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that an extended period of limitation under the Excise Act cannot be invoked when the assesee disclosed credit availed in monthly ER-1 returns.

M/s. Kalyani Steels Limited, the appellants are engaged in the manufacture of Pig Iron ( Solid and Liquid ) and Rolled Products Alloys/Non-Alloy falling under Chapter 72 of the Central Excise Tariff Act, 1985. During the relevant period from 2012-13 to 2014-15, they have availed a total CENVAT credit of Rs.5,42,07,573/- on the Iron Ore received from various 100% Export Oriented Units ( EOU ) viz., M/s. Laxminarayana Mining Company, M/s. MSPL Limited, M/s. Deccan Mining Syndicate Pvt. Ltd., etc., and used in the manufacture of finished products.

It was alleged that the CENVAT credit availed on the duty component of Basic Customs Duty, Education Cess and Secondary Higher Education Cess of Rs.2,03,93,277/- paid on the iron ore by the 100% EOU as per Sl. No.4 of Notification No.23/2003 CE dt. 31.3.2003 being not admissible to the appellant, a show-cause notice was issued on 14.3.2018 proposing recovery of the excess CENVAT credit of Rs.2,03,93,277/- availed during the said period along with interest and penalty. On adjudication, the demand was confirmed with interest and penalty.

 It was submitted that the suppliers who are 100% EOU units have cleared the Iron Ore in the Domestic Tariff Area ( DTA ) on payment of Excise duty in terms of the proviso to Section 3(1) of the Central Excise Act, 1944 calculated in terms of Sl. No.4 of the Notification No.23/2003-CE dated 31.3.2003. The Iron Ore cleared by the Mining Lease Holders, including 100% EOUs, were sold through an e-Auction conducted by the Monitoring Committee, constituted by the Supreme Court, for regulating and conducting the mining and sale of Iron Ore.

Iron Ore cleared by the DTA units was exempt from payment of Excise Duty in terms of Notification No. 12/2012-CE dated 1.3.2012. However, the EOUs were required to pay appropriate Excise Duty in terms of proviso to Sectio 3(1) of the Central Excise Act, 1944, which is equal to the aggregate duties of customs calculated in terms of provisions of the Customs Act, 1962.

The  Authorised Representative for the Revenue reiterated the findings of the  Commissioner. He has submitted that the appellant has discharged duty under Sl. No.4 of Notification No.23/2003-CE dated 31.3.2003. He has also submitted that the admissibility of CENVAT Credit of the duty paid by a 100% EOU is covered by Rule 3(7) of CENVAT Credit Rules, 2004.

A two-member bench of Dr D M Misra, Member ( Judicial ) and Mrs R Bhagya Devi, Member ( Technical ) found that the duty paid by a 100% EOU is an Excise duty, though the measure adopted in computing the Excise duty is aggregate applicable duties of Customs, payable by a 100% EOU; it cannot be the criteria, in determining the nature of duty.

It was evident that the appellants have been availing CENVAT credit of the duty paid on iron ore by the 100% EOUs and filing ER-1 returns periodically with the department. The Tribunal found that the assessee disclosed the CENVAT credit availed by them in their monthly ER-1 returns, therefore, the allegation of suppression of facts with intent to evade payment of duty is unsustainable.

 The CESTAT held that demand confirmed invoking an extended period of limitation cannot be sustained. While allowing the appeal, the bench set aside the impugned order.

To Read the full text of the Order CLICK HERE

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