By TIOL News Service

ALLAHABAD, APR 05, 2019: THE appellant is engaged in manufacture of automobile parts and import of various items. During the period 2003 to July 2014, the appellant imported goods under 11 Bills of entries and cleared the same on payment of additional Customs Duty. The said additional Customs Duty was not paid by them in cash, but the same was adjusted against DEPB. The appellant availed the Cenvat credit of the said additional Customs Duty paid by them vide DEPB scrips.

Revenue entertained a view that the benefit of additional Customs Duty is available as credit to the appellant only when the same is paid in cash. Inasmuch as the said duty was discharged on DEPB scrips, the appellant was not entitled to the benefit of Cenvat credit of the same. Accordingly proceedings were initiated against them by way of issuance of SCN invoking the longer period of limitation under proviso to section 11-A(1) of CEA, 1944. The appellants assailed the demand on merits as also on limitation.

However, the Additional Commissioner did not find favour with the appellant’s pleas and confirmed the demand along with imposition of penalty of identical amount under section 11AC. The order of Additional Commissioner was put to challenge before Commissioner(A), who upheld the same and rejected the appeal. On further appeal before Tribunal, the Tribunal vide its Final Order also took note of Punjab & Haryana High Court’s decision in case of Nill kanth Rubber Mills wherein the disputed legal issue was settled in favour of the assessee. However Tribunal by referring to Supreme Court decision in case of Sunwin Technosolution Pvt.Ltd. rejected the appeal on merits. However, the Tribunal took into consideration the assessee’s plea that demand was raised by invoking the longer period of limitation and by referring to the earlier decisions held that as there was confusion in the field on the disputed legal issue and by referring to the earlier decision of the Tribunal in the case of LNM Auto Industries Pvt.Ltd., the benefit of limitation was extended to the assessee.

Revenue being aggrieved with the said order of Tribunal filed an appeal thereagainst before the Allahabad High Court, which stand disposed of by High Court vide its order dated 07.01.2014, setting aside the order of the Tribunal and remanding the matter for fresh decision in the light of the observations and directions contained in the said order.

The Tribunal after going through the reasoning adopted by the lower authorities for invocation of longer period of limitation observed that -

++ There is no reference to any column or clause in the said ER-1 which requires an assessee to disclose the above information. In the absence of any requirement to disclose in the said returns, the factum of payment of CVD through DEPB, non-disclosure, by itself cannot be made the ground for invocation of extended period.

++ The Supreme Court have clearly observed that a mere failure of the assessee to disclose the information, by itself cannot be held to be a ground for invocation of extended period unless such non-disclosure was on account of any mala fide. In the present case there was no legal obligation on the assessee to disclose the requisite information in the ER-1 returns, in the absence of any clause or requirement in the said reports. As such the mere fact that the appellant had not stated in the ER-1 returns as regards payment of duty through DEPB cannot be adopted a valid ground to justifiably invoke the extended period of limitation.

During the relevant period there were decisions given below in favour of assessee laying down that the CVD paid thorugh DEPB scrips is available as a credit to the importer.

- SeshaSayee Paper and Boards Ltd. 2007-TIOL-1614-CESTAT-MAD

- SeshaSayee Paper and Boards Ltd. 2007-TIOL-2308-CESTAT-MAD

- Gujarat Ambuja Exports Ltd. 2012-TIOL-546-HC-AHM-CUS.

Further in terms of the direction of High Court, Tribunal have also examined the applicability of the Supreme Court’s decisions in case of Nicholas Piramal India Ltd. 2010-TIOL-101-SC-CX as also in the case of Tamil Nadu State Transport Corpn. Ltd.. In the case of Nicholas Piramal India Ltd., the Supreme Court has upheld the Tribunal’s decision in the holding one of the SCN as barred by limitation. In the case of Tamil Nadu State Transport Corpn. Ltd., the benefit of limitation was not extended to the assessee on the ground that they have not disclosed the fact of manufacture of aluminium paint to the department nor have maintained any accounts etc.. The ratio of the said decision is not applicable to the facts of the present case inasmuch during the relevant period, there were decisions in favour of the assessee and in the light of the Supreme Court’s decision in the case of Continental Foundations Joint Venture, appellants cannot be held guilty of any mala fide in following the said favourable decisions.

The demands having been raised beyond the normal period of limitation are barred. Accordingly the impugned order is set aside and appeal is allowed.

(See 2019-TIOL-965-CESTAT-ALL)