2011 (1) TMI 618 - AT - Central Excise

Re-credit - Arithmetical calculation errors - Appellant is engaged in the manufacture of processed fabrics - The original reversal of the credit in July 2004, with a view to avail the new excise scheme for clearance of the goods without payment of duty and the subsequent re-crediting of a part amount involves legal issue required to be decided by the authorities, in accordance with law - The Larger Bench of the Tribunal in the case of BDH Industries Ltd. (2008 -TMI - 30889 - CESTAT MUMBAI) held that in such a scenario, refund applications are required to be filed. In the absence of any reasons as to why the re-credit was being claimed by the appellant, it is not possible to hold that such re-credit was on account of any arithmetical errors - Decided against the assessee.

Summary

Issues:
1. Reversal and re-credit of excise duty credit by the appellant.
2. Justification for re-crediting the amount after two years.
3. Legal implications of the reversal and re-credit actions.
4. Penalty imposition by the original adjudicating authority.
5. Decision of the Commissioner (Appeals) regarding the penalty.

Analysis:
1. The appellant, engaged in manufacturing processed fabrics, reversed an amount of Rs.19,30,568/- from their cenvat account as duty credit corresponding to stock before a special excise scheme. Subsequently, after two years, they re-credited a portion of this amount, leading to proceedings initiated against them for the re-credited amount of Rs.3,87,635/-.

2. During adjudication, the appellant contended that the original debit entry was due to ignorance or clerical error, but failed to provide a clear explanation for the re-credit. The Assistant Commissioner confirmed the demand, interest, and a penalty of 100% of the duty. On appeal, the Commissioner (Appeals) upheld the demand but set aside the penalty due to the appellant's disclosure of the credit availed.

3. The Tribunal observed that the appellant failed to provide a valid reason for the re-credit, as evidenced by the Superintendent's letter questioning the entitlement to credit after over a year. The Tribunal emphasized that the reversal and re-credit actions involved legal issues that needed proper adjudication in line with the law, citing a precedent where refund applications were required in similar scenarios.

4. The Tribunal noted that the case was not merely about arithmetical errors but had legal implications, as the original reversal was done to benefit from a new excise scheme. Without a clear explanation for the re-credit, the Tribunal found no merit in the appeal and rejected it, aligning with the legal precedent set by the Larger Bench regarding such cases.