2008 (1) TMI 670 - AT - Central Excise

Summary

Issues:
Waiver of pre-deposit and stay of recovery under Section 11D of the Central Excise Act '44, imposition of penalty under Section 11AC, validity of demand for amount collected as excise duty, applicability of penalty under Section 11AC, interpretation of Section 11C(2) regarding refund of duty.

Waiver of Pre-Deposit and Stay of Recovery:
The appeal filed by M/s. Sri Raja Vinayagar Mills, Coimbatore (RVM) sought waiver of pre-deposit and stay of recovery of Rs. 2,12,873 demanded under Section 11D of the Act along with a penalty under Section 11AC. The Tribunal waived the pre-deposit requirement after hearing both parties and proceeded with the appeal.

Validity of Demand for Amount Collected as Excise Duty:
The case involved RVM clearing Viscose Staple Fibre yarn under an exemption but collecting an amount equivalent to the credit relatable to inputs from buyers, which was later returned through credit notes. The original authority proposed recovery under Section 11D and imposed a penalty under Section 11AC. The impugned order confirmed these proposals, prompting RVM to challenge the demand.

Applicability of Penalty under Section 11AC:
RVM argued that as they returned the collected amount before the show cause notice was issued, there was no duty evasion through suppression, collusion, or fraud, rendering the penalty under Section 11AC unsustainable. The Tribunal, citing a previous decision, emphasized that returning excess duty to buyers does not entitle the assessee to a refund, as the duty must be deposited with the Government as per Section 11D.

Interpretation of Section 11C(2) Regarding Refund of Duty:
The Tribunal referred to a previous decision to highlight that passing on duty incidence to customers and later remedying it through credit notes does not qualify for a refund under Section 11C(2). The judgment emphasized that returning excess duty to buyers does not absolve the assessee from depositing the amount with the Government, as required by law.

In conclusion, the Tribunal allowed the appeal by M/s. Sri Raja Vinayagar Mills Ltd. to the extent of vacating the penalty imposed under Section 11AC, emphasizing that the demand for the amount collected as duty was in accordance with the law. The judgment underscored the importance of complying with statutory provisions regarding duty collection and refund, clarifying that returning excess duty to buyers does not negate the obligation to deposit the amount with the Government.