2009 (4) TMI 618 - AT - Central Excise

Summary

Issues:
1. Appeal against order passed by Commissioner (Appeals) by Revenue.
2. Applicability of excise law change from 9-7-2004 for grey fabrics.
3. Issuance of excise invoices post 9-7-2004 without payment of duty.
4. Explanation by the appellant for the inadvertent lapse.
5. Initiation of proceedings under Section 11D of the Central Excise Act, 1944.
6. Confirmation of duty demand, interest, and penalty.
7. Adjustment of Modvat credit against duty demand.

Analysis:
1. The case involves an appeal by the Revenue against an order passed by the Commissioner (Appeals). The appellant firm, engaged in manufacturing grey manmade fabrics, opted for an exemption from Central Excise duty from 9-7-2004. However, they inadvertently continued to issue excise invoices post 9-7-2004 without payment of duty, resulting in a duty demand of Rs. 6,03,600/-.

2. The appellant explained that the lapse occurred due to a software error and reversed a significant amount of Cenvat credit. The Commissioner (Appeals) considered the appellant's surplus Cenvat credit of Rs. 5,27,135/- as on 9-8-04 and allowed the duty demand to be set off against this credit. The Commissioner held that the appellant's actions were negligent but not deliberate, attributing no malafide intent.

3. Proceedings were initiated under Section 11D of the Central Excise Act, 1944, resulting in the confirmation of duty demand, interest, and a penalty of Rs. 5,000/-. The Commissioner (Appeals) upheld the duty demand but allowed set off against the unused Cenvat credit. An amount recoverable in cash was determined, and the Range Officer was directed to reflect the debit against the duty liability in the appellant's Cenvat Credit Account.

4. The main issue in the appeal was whether the appellate authority was justified in adjusting the Modvat credit against the duty demand. The Commissioner (Appeals) had correctly observed that the duty demand could be set off against the credit available to the appellant during the relevant period. The judgment rejected the Revenue's appeal, affirming the adjustment of the duty demand against the Modvat credit available to the appellant.

5. The judgment, pronounced on 1-4-09, concluded that the appellant's duty demand of Rs. 6,03,600/- was upheld, with the set off against the unused Cenvat credit. The judgment highlighted the importance of adjusting available credits against duty demands and upheld the decision of the Commissioner (Appeals) in this regard, dismissing the Revenue's appeal.