2009 (2) TMI 647 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposed on the appellants for diversion of HR Coils acquired duty-free under Rule 19 of Central Excise Rules.
2. Dispute regarding the procedural error of taking credit in PLA instead of Cenvat credit account for duty paid on HR Coils used in manufacturing CR coils for domestic market.

Analysis:

Issue 1:
The case involved the appellants engaged in manufacturing various cold-rolled products using Hot Rolled (HR) coils as the main raw material. They were exporting a significant quantity of cold-rolled coils (CR) either under Rule 18 on duty payment or under Rule 19 under bond. The dispute arose when a duty demand of Rs. 1,07,01,273/- was imposed on the appellants, along with a penalty of Rs. 2 Lakhs under Rule 25 of Central Excise Rules, 2002. The demand and penalty were based on the allegation that the appellants diverted HR Coils received duty-free for manufacturing goods meant for home consumption, without appropriately debiting the duty payable on these coils. Despite paying the duty with interest, the appellants mistakenly took credit in their Personal Ledger Account (PLA) instead of the Cenvat credit account. The Tribunal acknowledged that the duty on HR Coils was paid by the appellants, but the procedural error led to the demand and penalty, which they deemed unjustifiable. Consequently, the duty demand and penalty were set aside, and the appeal was allowed with consequential relief.

Issue 2:
The appellants' representative argued that although duty was calculated and paid on the HR Coils used in manufacturing CR coils for the domestic market, the mistake of crediting the duty paid in the PLA instead of the Cenvat credit account was inadvertent. The appellants contended that they were eligible for the credit of duty paid on CR coils, and the procedural error should not have led to the duty demand and penalty. The Tribunal agreed that the mistake was minor and procedural, emphasizing that the appellants were entitled to the credit. The Tribunal found the duty demand and penalty unjustifiable, ultimately setting them aside and allowing the appeal with consequential relief.

In conclusion, the Appellate Tribunal CESTAT, Ahmedabad, in a detailed analysis of the case, overturned the duty demand and penalty imposed on the appellants for diverting HR Coils acquired duty-free under Rule 19 of Central Excise Rules. The Tribunal recognized the procedural error made by the appellants in crediting the duty paid in the PLA instead of the Cenvat credit account but deemed it a minor mistake that did not warrant the duty demand and penalty. The judgment provided consequential relief to the appellants, allowing their appeal.