Relief to TATA Steel: Dept bound to follow Principles of Consistency if no Fresh Materials Available, says Calcutta HC [Read Order]

The Calcutta High Court has granted relief to TATA Steel and held that the department is bound to follow Principles of Consistency if no fresh materials are available.

The respondent M/S. Tata Steel Limited (Bearing Division) is a manufacturer of Ball and Roller bearings. The respondent upon availing Cenvat Credit on the duty paid, a part of such raw materials procured by them is sent out for processing work to job workers. After processing is completed, the races are brought back factory which is used in the manufacture of bearings. The waste and scrap generated are not brought back but duty and cess were being paid by the respondent on monthly basis on such waste on quantity as per the standard input-output ratio and value of similar waste and scrap generated in the factory and sold from the assessee’s factory.

Show cause notice dated 31.03.2004 issued by the then Commissioner, Central Excise alleged there was a short payment of duty and this was on account of willful suppression of facts with an intent to evade the Central Excise laws. By relying on the submissions of the assessee The then Commissioner adjudicated the show cause notice and by a speaking order dated 25.05.2004 dropped the proceedings and the show cause notice proposing to recover Central Excise duty, penalty and interest were dropped.

About 3, years after the earlier show-cause notice was issued the new incumbent Commissioner of Central Excise, issued a show-cause notice dated 30.04.2007. The allegations were identical to that of the show cause notice dated 31.03.2004 and the period also overlaps. Aggrieved by the same, the assessee filed an appeal before the learned Tribunal. The Learned Tribunal after considering the facts of the case and the earlier decisions of the Tribunal and more particularly the order of the Commissioner dated 25.05.2004 allowed the appeal. Against the order, the revenue filed an appeal before High Court.

The respondent-assessee submitted that the respondents had taken credit for the raw materials used and when the raw materials are used finished product emerges and along with the finished products waste is generated and this waste is removed on the payment of duty. Therefore, it is submitted that if a product is removed on payment of duty, the input credit can legally be availed and there is no requirement of reversing the Cenvat Credit on a product that was cleared on payment of duty.

The High Court observed that for the same subject matter the earlier show-cause notice dated 31.03.2004 was issued. After adjudication, the proceedings were dropped, and the order attained finality. On the same subject matter in the year 2007, another notice was issued of which part of the period overlapped. If such is the case, the department can never bring the case of the assessee to be a wilful suppression or mis-statement and if that is the legal position, the extended period under Section 11A cannot be invoked.

Further observed by the court that applying the principles of consistency, the order binds the department as the transaction is identical and there are no fresh materials available with the Commissioner justifying the issuance of the show cause notice dated 30.04.2007. The mere use of the words or expression “wilfully suppressed” with intent to avoid duty cannot hold the assessee guilty of willful suppression. The same has to be established by the department by pointing out on what basis they have come to the prima facie conclusion that there has been wilful misstatement or suppression of facts. Therefore, the mere use of the said words and expressions cannot validate the show cause notice. Therefore, the initiation of the procedure itself is bad by law.

The division bench presided by Mr. Justice T.S. Sivagnanam and Mr. Justice Hiranmay Bhattacharyya has held that “we find no grounds to interfere with the order passed by the Tribunal. Accordingly, the appeal is dismissed”.

To Read the full text of the Order CLICK HERE

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