2013 (6) TMI 687 - CGOVT - Central Excise

Duty demand - non reversal of proportionate Cenvat credit on breakages of glass bottles - Invocation of extended period of limitation - Held that - extended period can be invoked only for reason of collusion, fraud, misstatement or suppression of fact with an intention to evade duty. In this case the applicant has undisputedly declared/mentioned breakage of bottles in their RG-I register and ER-I monthly returns. They further stated that many audit parties of Central Excise department conducted audit from 2004 to 2009 of their record and nobody pointed out any evasion by way of non-reversal of Cenvat credit as alleged by the department in this case. Under such circumstances, Government finds that when the breakage of bottle by applicant has been declared in their excise record and their verification by such records by various excise audit teams is undisputed, there can be no reason to allege collusion, fraud, misdeclaration or suppression of fact by the applicant. Hence, given the fact and circumstances of this specific case, extended period of five years in terms of Section 11A(1) cannot be invoked. Cenvat credit on glass bottles that are damaged or broken is not admissible. Even remission of duty before removal on goods lost or destroyed by natural causes or unavoidable accident if claimed by the assessee they have to reverse the Cenvat credit taken on inputs used in the said goods as per the Circular No. 800/33/2004-Cx., dated 1-10-2004. In view of the above instructions of Government, the assessee is not entitled to avail the credit on broken or damaged glass bottles/pet bottles at whatever stage they lie in the factory. - Matter remanded back - Decided partly in favour of assessee.

Issues:
1. Confirmation of demand of duty on breakages of glass bottles after RG-I stage.
2. Imposition of penalty equal to the duty amount.
3. Application of extended period for demand of duty.
4. Reversal of Cenvat credit on breakages of glass bottles.
5. Consideration of audit findings and circulars in determining duty liability.

Analysis:
1. The case involved the confirmation of demand of duty on breakages of glass bottles after the RG-I stage. The original authority confirmed the duty demand and imposed a penalty equal to the duty amount. The Commissioner (Appeals) upheld the duty demand but reduced the penalty. The applicant challenged this in a revision application before the Central Government.

2. The applicant contested the imposition of penalty and the demand of duty, arguing that the breakages were duly recorded in their RG-I register and ER-I monthly returns. They emphasized that previous audits by Central Excise department did not raise any issues regarding the non-reversal of Cenvat credit on breakages. The applicant cited legal precedents to support their argument against the penalty imposition.

3. The Central Government analyzed the provisions of Section 11A(1) of the Central Excise Act, 1944, which allows the invocation of an extended period for duty demand only in cases involving fraud, collusion, misstatement, or suppression of facts with intent to evade duty. Since the breakages were recorded and audited without any discrepancies noted, the extended period was deemed inapplicable. The Government directed the case to be remanded back to the original authority for re-quantifying the demand within the one-year period.

4. The issue of reversal of Cenvat credit on breakages of glass bottles was extensively discussed. The original authority highlighted that Cenvat credit on damaged or broken bottles is not admissible as per relevant circulars. The Government emphasized the need to reverse Cenvat credit on inputs used in final products in case of breakages. The applicant's reliance on past revision orders was dismissed due to the subsequent issuance of clarifying circulars.

5. The Central Government considered audit findings, circulars, and legal precedents in determining the duty liability related to breakages of glass bottles. The Government's decision to remand the case for re-quantification within the one-year period and for imposing a proportionate penalty was based on the legal analysis and factual considerations presented in the revision application.

In conclusion, the Central Government disposed of the revision application by ordering a remand to the original authority for re-assessment of duty demand and penalty, ensuring a fair opportunity for the applicant to present their case.

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