2010 (2) TMI 1016 - AT - Central Excise

Summary

Issues Involved:
1. Duty Liability and Limitation
2. Bona Fide Belief and Suppression of Facts
3. Penalty Imposition and Applicability of Section 11AC
4. Eligibility for Cenvat Credit

Detailed Analysis:

1. Duty Liability and Limitation:
The primary issue was whether the duty liability for the period from June 2002 to May 2006 was barred by limitation. The assessee had initially paid appropriate duty on Repeaters but declared NIL production and clearance from June 2002 to May 2006, resuming duty payments from June 2006. They later paid Rs. 1,02,67,096/- in Central Excise Duty with interest, claiming confusion about the manufacturing process. The adjudicating authority confirmed the demand for duty and interest, rejecting the time-bar argument. The tribunal upheld this decision, stating that the assessee should have sought clarification from the department before discontinuing duty payments based on a consultant's opinion.

2. Bona Fide Belief and Suppression of Facts:
The assessee argued they had a bona fide belief that their activities did not amount to manufacture based on a consultant's opinion and thus declared NIL production. They contended there was no intention to evade duty and that the department could have verified their returns. The tribunal disagreed, stating that the assessee's failure to inform the department about the consultant's opinion and their subsequent actions constituted suppression of facts. The tribunal emphasized that mere contravention of provisions is insufficient; intention to evade must also be proved, which was established in this case.

3. Penalty Imposition and Applicability of Section 11AC:
The assessee contended that having paid the duty before the issuance of the show cause notice, they should benefit from Section 11A(2B) of the Central Excise Act, 1944, which limits the penalty to 25% of the duty amount. The tribunal noted that Section 11A(2B) does not apply in cases of suppression of facts. However, the adjudicating authority correctly imposed a 25% penalty, as supported by the Punjab and Haryana High Court's decision in CCE, Rohtak v. J.R. Fabrics. The tribunal upheld this reduced penalty, rejecting the revenue's appeal for an equivalent penalty amount, citing the Supreme Court's decision in UOI v. Dharamendra Textile Processors.

4. Eligibility for Cenvat Credit:
The assessee claimed eligibility for Cenvat credit on inputs used in manufacturing Repeaters during the disputed period. The tribunal acknowledged this claim, noting that subsequent duty payment entitles the assessee to Cenvat credit, provided they satisfy the authorities regarding the duty-paid character of inputs, receipt, and consumption in the factory. The tribunal remanded this issue back to the adjudicating authority for reconsideration and verification.

Conclusion:
The tribunal upheld the duty and interest liability, confirmed the reduced penalty of 25%, rejected the revenue's appeal for an equivalent penalty, and remanded the issue of Cenvat credit eligibility back to the adjudicating authority for further consideration.