2010 (5) TMI 728 - AT - Central Excise

CENVAT credit - demand of 10% price of the exempted goods as required - Rule 6(3)(b) of the CCR 2004 - non-maintenance of separate accounts - time limitation - Held that - Department was having the knowledge as it is clear that the respondent is clearing their goods as an exempted goods shown in the E.R.-1 returns which were being filed periodically by the respondent - the show cause notice issued on 17-1-2008 for the period 1-8-2006 to 10-5-2007 the period prior to 18-1-2007 is barred by limitation - there is no suppression of facts and thus extended period and penalty not invocable - appeal dismissed - decided against Revenue.

Summary

Issues:
- Demand for 10% of the price of exempted goods cleared
- Invocation of extended period for duty demand
- Verification of exemption sought by the appellant
- Suppression of facts and penalty imposition

Analysis:
1. Demand for 10% of the price of exempted goods cleared:
The case involved a demand for 10% of the price of exempted goods cleared by the respondent, who was engaged in manufacturing Electrical Transformers. The show cause notice alleged that the respondent had not paid the required 10% price of the exempted goods under Rule 6(3)(b) of the CENVAT Credit Rules 2004 due to not maintaining separate accounts. The adjudicating authority confirmed the duty demand, but on appeal, the Commissioner (Appeals) dropped the demand for the extended period.

2. Invocation of extended period for duty demand:
The Revenue contended that the extended period should be invoked as the respondent was clearing exempt final products without maintaining separate accounts for duty payable and exempted goods. However, the appellate tribunal noted that the department failed to verify the exemption claimed by the respondent and did not reverse the credit. The tribunal determined that the period prior to a specific date was barred by limitation, and the Commissioner (Appeals) correctly held that there was no suppression of facts, making the extended period invocation invalid.

3. Verification of exemption sought by the appellant:
The tribunal emphasized that it was the duty of the department to verify the exemption claimed by the respondent and whether the credit had been reversed or not. The department's failure to verify the exemption sought and the knowledge that the goods were being cleared as exempted, as indicated in the ER-1 returns, led to the rejection of the Revenue's appeal.

4. Suppression of facts and penalty imposition:
The Commissioner (Appeals) found no suppression of facts, which rendered the extended period non-invocable. Consequently, no penalty under Section 11AC could be imposed. The tribunal concurred with this finding, upholding the impugned order and rejecting the Revenue's appeal.

In conclusion, the tribunal upheld the decision of the Commissioner (Appeals) due to the lack of suppression of facts and the failure of the department to verify the exemption claimed by the respondent, leading to the rejection of the Revenue's appeal regarding the demand for 10% of the price of exempted goods cleared.