2007 (3) TMI 107 - AT - Central Excise

Demand - Revenue contended that respondent has suppressed the fact with intent to evade to payment of duty and accordingly demand were made alongwith penalty- Held that revenue contention not correct and set aside demand and penalty

Summary

Issues:
1. Whether the extended period of limitation is applicable due to suppression of facts with intent to evade payment of duty.
2. Whether the show cause notice issued after 2 1/2 years is barred by limitation.
3. Whether the imposition of penalty is warranted.

Analysis:
1. The case involved the respondent availing Cenvat credit on damaged inputs, which was detected by the Central Excise officer during a visit to the factory premises. The adjudicating authority confirmed the demand of duty and imposed a penalty of equal amount. However, the Commissioner (Appeals) set aside the adjudication order, stating that the show cause notice was issued beyond the normal period and the extended period cannot be invoked as the credit was reversed promptly after detection. The Revenue appealed against this decision.

2. The Revenue argued that the reversal of credit after detection is indicative of suppression of facts with intent to evade payment of duty, justifying the application of the extended period of limitation. Citing the Nizam Sugar Factory Ltd. case, the Revenue contended that the reversal of credit does not absolve the respondent of the alleged suppression.

3. On the other hand, the respondent maintained that they promptly reversed the credit upon detection by the Central Excise officer, demonstrating no intent to evade payment of duty. They relied on various tribunal decisions to support their stance that the show cause notice issued after 2 1/2 years is time-barred. The respondent emphasized that there was no mala fide on their part and, therefore, the imposition of penalty was unwarranted.

4. The Tribunal observed that the respondent voluntarily reversed the credit upon detection, indicating no suppression of facts. The show cause notice aimed to adjust the amount of credit already reversed by demanding duty and imposing penalties. The Tribunal concurred with the respondent's argument that the reversal of credit immediately after detection negates any intent to evade duty. Consequently, the Tribunal upheld the decision to set aside the imposition of penalty and interest, while rejecting the appeal in other aspects. The judgment was pronounced and dictated in open court.