2026-VIL-536-CESTAT-CHE-CE
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  2. 2026-VIL-536-CESTAT-CHE-CE

CENTRAL EXCISE CESTAT Cases

Central Excise - Reversal of common CENVAT credit under Rule 6(3A) of CENVAT Credit Rules, 2004 - The appellant, engaged in manufacture of printing and writing paper, availed CENVAT credit on inputs and input services used commonly and opted for proportionate reversal under Rule 6(3A) - Department alleged that the appellant had incorrectly applied the formula by restricting it to common input services and by not properly including the value of electricity generated at windmills and traded goods. The appellant contended that for the purpose of Rule 6(3A), the term "total CENVAT credit" refers only to total common input service credit and not to credit exclusively used in manufacture of dutiable goods - HELD - The appellant has correctly applied Rule 6(3A) by confining the computation to common credit and by including the value of electricity generated and trading turnover for the purpose of determining proportionate reversal. The interpretation adopted in the impugned orders, which loads exclusive dutiable credit into the formula and seeks to substitute the statutory option exercised by the appellant, is contrary to the scheme of Rule 6 and settled judicial precedent - Further, the impugned order has travelled beyond the scope of the Show Cause Notice to the extent it confirms demand on grounds not specifically alleged therein - The extended period of limitation under Section 11A is not invocable as there is no evidence of fraud, collusion, wilful misstatement or deliberate suppression of facts - Accordingly, the demands are set aside and the penalties imposed are also deleted - The appeals were allowed - Scope of Show Cause Notice - HELD - The adjudication cannot travel beyond the allegations in the Show Cause Notice. The SCN is the foundation of the case and defines the scope of adjudication. By confirming demand under an interpretation not put to the appellant's notice in the SCN and by effectively substituting the option chosen by the appellant, the adjudicating authority has enlarged the scope of the proceedings, which is legally impermissible - Invocation of extended period of limitation under Section 11A - HELD - Where the dispute is purely interpretational and the assessee has disclosed all relevant particulars in statutory returns, invocation of the extended period is impermissible in law. The department has not established any deliberate withholding of information. In the absence of any allegation in the Show Cause Notice establishing intent to evade duty with supporting material, the extended period cannot be sustained merely on interpretational differences - Imposition of penalty under Rule 15(2) read with Section 11AC - HELD - Where the dispute pertains to interpretation of statutory provisions and the assessee has acted on a plausible interpretation supported by judicial decisions, imposition of penalty is not justified. In the present case, there is no evidence of fraud, collusion, wilful misstatement or deliberate suppression of facts. Therefore, the essential pre-condition for imposition of penalty under Rule 15(2) read with Section 11AC is not satisfied. Accordingly, the penalties imposed were set aside.
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