2025 (6) TMI 1669 - AT - Central Excise

Levy of penalty - directly diverting imported steam coal from the ports to buyers premises without bringing it into their own godown - revenue loss or not - suspension of the appellant s registration as a Dealer - second SCN issued by invoking extended period of limitation - Levy of penalty - HELD THAT - It is found that in the first Show Cause Notice there is no allegation that there has been any revenue loss. It is an admitted fact that the Appellant has directly cleared the goods from the port to buyer s premises. As pointed out by the Ld.Counsel the Board s Circular No. 713/29/2003-CX dated 07.05.2003 has clarified that Dealer can do so. Issuance of second SCN proceedings by invoking extended period of limitation - HELD THAT - It is found that the Department could not have invoked extended period provisions once again after having invoked this provision in the first Show Cause Notice proceedings. The Hon ble Supreme Court in the case of Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT has held that Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same hold that there was no suppression of facts on the part of the assessee/appellant. Conclusion - i) The penalties imposed and suspension of dealer registration were set aside. ii) The second Show Cause Notice invoking extended period provisions was invalid. There are no merits in the Appeals filed by the Revenue - appeal dismissed.

Summary

The core legal questions considered by the Tribunal in this matter were:

1. Whether the Appellant's act of directly diverting imported steam coal from the ports to the buyers' premises, without bringing the goods to their own godown, constituted a contravention of the Cenvat Credit Rules, 2004, thereby justifying imposition of penalty and suspension of registration.

2. Whether the issuance of a second Show Cause Notice invoking extended period provisions was valid, particularly when a first Show Cause Notice covering the same period and facts had already been issued.

3. Whether the Appellant's alleged misdescription of goods under different Central Excise Tariff headings on dispatch to customers had any revenue implication or constituted a violation warranting penalty.

4. The applicability and interpretation of Circular No. 713/29/2003-CX dated 07.05.2003 issued by the Central Board of Indirect Taxes and Customs (CBIC), which clarifies procedures related to movement of goods under the Cenvat Credit Rules.

Issue 1: Direct diversion of imported coal without bringing it to the dealer's godown

The relevant legal framework involved the provisions of the Cenvat Credit Rules, 2004, which regulate the conditions under which input goods can be received and cleared by a registered dealer to claim Cenvat credit. The Department's contention was that the Appellant violated these rules by not bringing the coal to their godown but directly dispatching it to buyers, which was alleged to be improper and liable for penalty and suspension of registration.

However, the Tribunal noted the Board's Circular No. 713/29/2003-CX dated 07.05.2003, which explicitly clarified that goods are not mandatorily required to be brought into and unloaded at the dealer's premises; rather, direct transfer to the buyer's premises under proper documentation is permissible. This circular thus provided authoritative guidance that the Appellant's practice was lawful.

The Tribunal observed that there was no allegation or evidence that the Appellant failed to maintain proper documentation or that there was any revenue loss arising from the direct dispatch of coal. The absence of such adverse findings was significant. The Commissioner (Appeals) had set aside the penalties and suspension on this basis, and the Tribunal concurred with this reasoning.

Competing arguments from the Revenue that the practice was a contravention were rejected due to the clear Board circular and lack of revenue impact. The Tribunal held that the Appellant's conduct did not violate the Cenvat Credit Rules in this respect.

Issue 2: Validity of the second Show Cause Notice invoking extended period provisions

The Department issued a second Show Cause Notice for the same periods, invoking the extended period provisions, alleging additional irregularities including misdescription under different Central Excise Tariff headings.

The Tribunal analyzed the principle established by the Hon'ble Supreme Court in the cited precedent, which held that once a Show Cause Notice has been issued covering all relevant facts, subsequent notices invoking extended period provisions on the same facts cannot be sustained as there is no suppression of facts by the assessee. The knowledge of all facts by the authorities at the time of the first notice precludes invoking extended period provisions again.

Applying this precedent, the Tribunal found that the second Show Cause Notice was invalid as the Department had already invoked extended period provisions in the first notice for the same period and facts. Therefore, the second adjudication and penalty imposition were vitiated.

The Tribunal also noted that the Commissioner (Appeals) had relied on this precedent in setting aside the penalty imposed in the second adjudication.

Issue 3: Alleged misdescription of goods under different Central Excise Tariff headings

The Revenue contended that the Appellant had given different descriptions of the goods while dispatching them, implying a possible evasion or misclassification.

The Tribunal found that even if such differences existed, they had no revenue implication. There was no allegation or evidence that the misdescription resulted in any loss of duty or evasion. The Revenue itself did not press this point strongly, conceding that it did not affect revenue.

Accordingly, this issue did not support the imposition of penalty or suspension.

Conclusions and final determinations

The Tribunal upheld the Commissioner (Appeals) orders setting aside the penalties and suspension of registration imposed on the Appellant. It dismissed the Revenue's appeals on the following grounds:

• The direct dispatch of imported coal from ports to buyers' premises without unloading at the dealer's godown was permissible under the Board's Circular No. 713/29/2003-CX and did not violate the Cenvat Credit Rules.
• The second Show Cause Notice invoking extended period provisions was invalid as the Department had already invoked the extended period in the first notice covering the same facts and period, in line with the Supreme Court's ruling in the cited case.
• Any alleged misdescription of goods did not have any revenue implication and did not justify penalty.

The Tribunal explicitly quoted the Supreme Court's holding that "there was no suppression of facts on the part of the assessee/appellant" and that issuance of subsequent Show Cause Notices on the same facts was impermissible.

Thus, the Tribunal established the principle that procedural safeguards against multiple invocations of extended period provisions must be respected, and that Board circulars clarifying procedural compliance are binding unless rebutted by evidence of revenue loss or improper documentation.