2010 (7) TMI 397 - AT - Central Excise

Reversal of cenvat credit Glass bottles broken and billed - appellant have recovered additional amounts from the dealers for the breakages and for unsorted glass bottles - order proceeds on the ground that the appellant required to reverse pro rata cenvat credit on the glass bottles broken and billed by them - no allegation that the assessee had availed cenvat credit wrongly or has been refunded cenvat credit erroneously - entire order is liable to be set aside - no allegation of suppression and there no invocation of proviso to Section 11A(1) or Rules 15(2) of the CCR for demanding an amount from the assessee for a period beyond limitation Appeal allowed

Issues:
1. Demand of duty on amounts collected by the appellant for breakages and unsorted glass bottles.
2. Time bar on the show cause notice issued to the appellant.
3. Provisions of Cenvat Credit Rules for reversal of pro rata cenvat credit.
4. Inclusion of cenvat credit in the compensation amount.
5. Legality of duty demand on labor charges for sorting unsorted crates.
6. Penalty imposed under Rule 13 of CENVAT Credit Rules, 2004.

Issue 1: Demand of duty on amounts collected for breakages and unsorted glass bottles
The appellant, a manufacturer of aerated waters and edible preparations, collected amounts from dealers for breakages and unsorted glass bottles. The department claimed duty on these amounts, leading to a show cause notice, reversal of CENVAT credit, interest, and penalty. The appeal questioned the sustainability of duty demand on pro rata CENVAT credit for bottle breakages. The Commissioner (Appeals) upheld the duty demand, citing the compensation received by the appellant as inclusive of CENVAT credit. However, the appellate tribunal found no evidence of such inclusion, leading to the order being set aside based on lack of provisions in Cenvat Credit Rules for such recovery.

Issue 2: Time bar on the show cause notice
The appellant argued that the show cause notice, issued in 2005 for recovery from 2002 to 2003, was time-barred as authorities were aware of the inputs' consumption. The tribunal noted the absence of allegations of suppression or invocation of relevant provisions for demanding amounts beyond the limitation period, rendering the notice hit by limitation. Consequently, the tribunal set aside the impugned order based on the time bar issue.

Issue 3: Provisions of Cenvat Credit Rules for reversal of pro rata cenvat credit
The appellant contended that there were no provisions in Cenvat Credit Rules for pro rata reversal of CENVAT credit on broken bottles. The tribunal agreed, highlighting the absence of allegations of wrongful credit availing or erroneous refunds, leading to the order being set aside on this ground as well.

Issue 4: Inclusion of cenvat credit in the compensation amount
The tribunal found no evidence supporting the inclusion of CENVAT credit in the compensation amount received by the appellant. As a result, the findings of the Commissioner (Appeals) were deemed unsustainable, contributing to the setting aside of the impugned order.

Issue 5: Legality of duty demand on labor charges for sorting unsorted crates
Regarding duty demand on labor charges for sorting unsorted crates, the tribunal ruled that this cost was not includable in the assessable value of finished goods, setting aside the demand on this element of cost incurred by the appellant.

Issue 6: Penalty imposed under Rule 13 of CENVAT Credit Rules, 2004
Lastly, the tribunal addressed the penalty imposed under Rule 13 of CENVAT Credit Rules, 2004, reducing it to Rs. 10,000 based on the circumstances of the case. The tribunal's decision to set aside the penalty further contributed to the overall allowance of the appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore covers the various issues involved in the case, providing a comprehensive understanding of the legal complexities and the tribunal's decision-making process.

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