2017 (1) TMI 1852 - AT - Central Excise

Imposition of penalty u/s 11AC of the Central Excise Act - confiscation - CENVAT credit - assessee opted for exemption from payment of Central Excise duty in terms of N/N. 8/2003 dated 01.03.2003. While opting to avail SSI exemption benefit as stipulated in the above notification the assessee is required to reverse the CENVAT credit on inputs lying in stock and on inputs contained in finished and semi finished goods lying in stock - the reversal of credit is in dispute in the present case - Held that - The appellant had been filing regular returns reflecting the credit availed by them. So also they intimated their intention to avail benefit of SSI exemption by filing letter to the Department dated 05.04.2003. It is also to be considered that the N/N. 8/2003 dated 01.03.2003 was a new notification during that period After filing letter opting for SSI exemption the respondent has filed the quarterly returns on 17.07.2003 showing the reversal of credit of 3, 500/-. This return was scrutinized by the department only in January 2004 Meanwhile the Anti-Evasion Wing conducted search in the premises of respondent. Thus search was before scrutiny of returns. The notice was issued to the appellant not on basis of the returns filed by the respondent. It is for this reason that Commissioner (Appeals) has observed that the department could have conducted scrutiny of the returns which disclosed the reversal of credit and called for details from the respondent. That the mistake ought to have been pointed out to the respondent even before search and SCN as the mistake is only a remedial mistake. In spite of the search conducted in the premises and verification of records done by the Anti-Evasion Wing of the Department no case has been alleged against the respondent that the respondent availed wrong credit or that the respondent availed irregular credit with intent to evade payment of duty. This can only point to the conclusion that the credit availed by the respondent and the returns filed are proper and do not contain any discrepancy. Non-maintenance of input stock cannot be a criterion to conclude suppression when the stock can be arrived at by the quantity in process and by quantity of final products. Penalty set aside - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Non-reversal of CENVAT credit.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
3. Confiscation of goods under Rule 25 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Non-reversal of CENVAT credit:
The respondents, engaged in manufacturing 'Pipe Fittings and Forgings', opted for SSI exemption under Notification No. 8/2003 dated 01.03.2003 and reversed ?3500/- as CENVAT credit balance as of 01.03.2003. The Department alleged that the respondents did not reverse the entire CENVAT credit on inputs lying in stock, as required under Rule 9 of the CENVAT Credit Rules, 2002. A search conducted on 11.09.2003 revealed a significant stock of inputs, and the Department concluded that the respondents should have reversed ?13,51,828/- based on the total value of inputs lying in stock as on 31.03.2003. Consequently, goods valued at ?84,48,924/- were seized.

2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The original authority confirmed the demand of ?13,51,828/- as CENVAT credit to be reversed, along with interest and an equal amount of penalty under Section 11AC. The Commissioner (Appeals) later reduced the redemption fine but upheld the demand. The Tribunal remanded the matter to the original authority to examine if the penalty under Section 11AC was applicable, considering there was no suppression of facts. The adjudicating authority re-imposed the penalty, but the Commissioner (Appeals) set it aside, stating there was no suppression or intention to evade duty.

3. Confiscation of goods under Rule 25 of the Central Excise Rules, 2002:
The original authority ordered the confiscation of seized goods valued at ?19,92,136/- with an option to pay a redemption fine. The Commissioner (Appeals) set aside the confiscation, concluding that the goods were not liable for confiscation as there was no suppression of facts or intent to evade duty.

Department's Arguments:
The Department argued that the respondents did not comply with the transitional provisions of Rule 9 of CCR 2002 and only reversed ?3500/-. They contended that the respondents manipulated records to conceal the actual credit on inputs and did not disclose vital information in their returns. The Department maintained that the respondents' conduct indicated suppression of facts with intent to evade duty, justifying the imposition of penalty and confiscation of goods.

Respondent's Arguments:
The respondents claimed they believed reversing the credit balance in the CENVAT register sufficed for compliance. They argued that the credit availed was properly recorded and disclosed in monthly returns. The respondents contended that the non-reversal of the entire credit was due to ignorance of law, not an intention to evade duty. They maintained that the Department was aware of the credit availed, and there was no suppression of facts.

Tribunal's Findings:
The Tribunal noted that the respondents had filed regular returns and disclosed the credit availed. The Department did not allege any discrepancy in the returns or irregular credit availed by the respondents. The Tribunal found that the respondents' belief that reversing the closing balance of credit as per the register was sufficient, considering the notification was new at the time, was plausible. The Tribunal concluded that there was no suppression of facts or intent to evade duty, and the Commissioner (Appeals) rightly set aside the penalty and confiscation of goods.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the Commissioner (Appeals)'s order that set aside the penalty under Section 11AC and the confiscation of goods. The Tribunal found no evidence of suppression of facts or intent to evade duty by the respondents.