The Bombay High Court recently illuminated the ability of the Revenue to invoke a larger period of limitation in matters involving possible suppression or fraud while adjudicating a matter involving disputed Central Value Added Tax ( CENVAT ).
The Central Excise Appeal before the Bombay High Court was filed under Section 35G of the Central Excise Act, 1944 by M/s Visen Industries Limited, a manufacturer of polymer emulsions used in paint, textiles and adhesive industries.
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Vinyl Acetate Monomer, the raw material used by the Appellant-Assessee for product manufacture was imported by the Appellant and stored in Customs Bonded Warehouses.
The Respondent-Revenue conducted a detailed investigation on the activities of the Petitioner where it was unearthed that the Appellant would clear the Vinyl Acetate Monomer to their customers directly from the Custom Bonded Warehouses, but maintained the records in such a manner that the said raw material was received in the factory and subsequently cleared from the factory without bringing the said goods into the factory.
The Revenue was of the view that such a process had been undertaken by the Assessee to avail CENVAT credit of the admissible duties and issue a central excise invoice to clear the same to customers by debiting the CENVAT credit account and passing the credit on to their customers.
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On the contention of suppression and fraud, the Revenue officials invoked a larger period of limitation and issued a show-cause notice to the Petitioner. The Appellant was slapped with a penalty of Rs.6,82,11,154/- under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944 which was contested in vain before the Customs Excise & Service Tax Appellate Tribunal (CESTAT).
CESTAT disallowed CENVAT credit of Rs.5,63,66,047/- and ordered recovery of the amount which had already been wrongly availed and utilized by the Appellant priorly. The present appeal was preferred against the order of the CESTAT.
The two-judge Bench of Justices M. S. Sonak and Jitendra Jain observed that the Tribunal had rightly upheld the order for recovery of Rs.5,63,66,047/- after unearthing the modus operandi of the Appellant. Observing that the Appellant failed to argue against the invocation of the larger limitation period for recovery and penalties due to suppression or fraud, the High Court upheld such invocation because it was justified, unchallenged, and confirmed by the Tribunal.
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