2011 (6) TMI 658 - AT - Central Excise

Cenvat credit - AED (T&TA) and AED (T&TA) - department was of the view that since the inputs received by the appellant had suffered AED (T&TA) and AED (T&TA) was part of the price of the inputs and though the credit of AED (T&TA) had been availed by the appellant, the same could not be utilized for the reason that there was no AED (T&TA) on the final products and there was not even possibility of this credit being utilized, the quantum of AED (T&TA) should have been added to the cost of production Held that - just because during the period of dispute, they were not in position to utilize the AED Credit, the AED (T&TA) cannot be included in the cost of inputs. Moreover, the fact that the appellant have availed Cenvat credit of AED (T&TA) was known to the department and it was also known to the department that there is no AED (T&TA) on the final product, requirement of pre-deposit of duty demand, interest and penalty is, therefore, waived, stay application is allowed

Issues:
1. Whether Additional Excise Duty (Textile and Textile Articles) (AED (T&TA)) should be included in the cost of production of grey fabrics.
2. Whether the duty demand is time-barred.
3. Whether penalty under Section 11AC has been correctly imposed.

Issue 1:
The case involved a dispute regarding the inclusion of AED (T&TA) in the cost of production of grey fabrics. The appellants, manufacturers of grey fabrics, received inputs like Polyester Staple Fibre, Viscose Staple Fibre, Poly Tops, Man Made Yam, for which they took Cenvat credit. The department contended that since AED (T&TA) was part of the price of inputs and the appellants could not utilize the AED (T&TA) credit on the final products, the AED (T&TA) should be added to the cost of production. The Tribunal held that the inability to utilize the AED (T&TA) credit did not warrant its inclusion in the cost of production, as the credit could potentially be used in the future if AED (T&TA) was imposed on the final product. Citing the judgment in C.C.E., Pune v. Dai Ichi Karkaria, the Tribunal ruled that if the input duty credit had been taken, the duty on inputs should not be included in the cost of production. As the appellants had availed the Cenvat credit of AED (T&TA), the inclusion of AED (T&TA) in the cost of inputs was unwarranted. The Tribunal found merit in the appellant's argument and waived the requirement of pre-deposit for hearing the appeal.

Issue 2:
Regarding the time-barred duty demand, the appellants argued that the show cause notice was issued on 20-11-2007 for the period from 1-4-2002 to 31-2-2006, making it time-barred. The department had not invoked the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944. The Tribunal concurred with the appellants, stating that the duty demand prima facie appeared to be time-barred as the longer limitation period did not seem applicable. Consequently, the Tribunal found in favor of the appellants on this issue.

Issue 3:
The imposition of penalty under Section 11AC was contested by the appellants. The department argued that the longer limitation period had been correctly invoked and the penalty was justified. However, the Tribunal, considering the circumstances, ruled in favor of the appellants and waived the requirement of pre-deposit for the penalty as well. The Tribunal allowed the stay application and stayed the recovery of duty demand, interest, and penalty until the disposal of the appeal.

In conclusion, the Tribunal ruled in favor of the appellants on all counts, finding that the inclusion of AED (T&TA) in the cost of production was unwarranted, the duty demand was time-barred, and the penalty under Section 11AC was not justified. The requirement of pre-deposit for duty demand, interest, and penalty was waived, and the stay application was allowed.

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