2013 (11) TMI 741 - AT - Central Excise

Invocation of Section 11A (2B) or not Extended period of limitation Wrong procedure for cenvat credit Actually the amount should have been reversed short payment of duty as well as excess payment - Held that - The appellants have misunderstood the legal provisions and have paid duty on transaction value over a period of five years - there was not only short payment but also excess payment - In such a situation it is difficult to sustain the view that there was mis-declaration with intent to evade duty on the part of the appellants - As regards suppression of facts it cannot be invoked since there was no need for the assessee to report the methodology followed by them for payment of duty on the inputs cleared as such - thus the extended period could not have been invoked - Penalty under Rule 15(2) read with Section 11AC of Central Excise Act 1944 could not have been invoked. Penalty under Rule 15(1) of CCR 2004 Refund of Excess amount paid Held that - The appellant clearly misunderstood the legal provisions and the appellant is expected to apply the relevant Rule correctly - appellants have not applied the Rule relating to clearance of inputs as such correctly thus penalty of Rs. 5,000/- imposed under Rule 15(1) of CENVAT Credit Rules 2004 upheld - the contention that they are entitled to refund of the excess amount paid before the issue of show-cause notice is valid - according to Section 11A(2B) itself, if the amount paid by the appellant is subject to verification and in this case issue of show-cause notice invoked extended period it is obligatory for the department to refund the amount which has been deposited in excess - the revenue is bound to refund the amount decided in favour of Assessee.

Summary

Issues:
1. Incorrect calculation of duty payment on imported tee nuts.
2. Initiation of proceedings for short payment of duty and confiscation of goods.
3. Applicability of penalty under Rule 15(1) and 15(2) of CENVAT Credit Rules 2004.
4. Misunderstanding of legal provisions by the appellant.
5. Refund of excess amount paid by the appellant.

Issue 1: Incorrect calculation of duty payment on imported tee nuts
The appellant, engaged in manufacturing, availed CENVAT credit for duty paid on inputs and services. The officers found that the appellant should have reversed the credit taken for tee nuts imported for domestic market clearance. The appellant paid the short amount before the show-cause notice was issued. The proceedings resulted in the demand confirmation with interest and confiscation of goods.

Issue 2: Initiation of proceedings for short payment of duty and confiscation of goods
The appellant mistakenly paid duty on tee nuts cleared after importation, resulting in excess or short payments. The appellant argued no intention to evade duty, as evidenced by examples provided. The Tribunal noted the appellant's misunderstanding of legal provisions and that the extended period could not be invoked. The penalty imposed for short payment was set aside, and the confiscation of goods was confirmed.

Issue 3: Applicability of penalty under Rule 15(1) and 15(2) of CENVAT Credit Rules 2004
The appellant's incorrect application of the Rule for clearance of inputs led to a penalty under Rule 15(1) of CENVAT Credit Rules 2004. The Tribunal upheld this penalty, as the appellant failed to apply the relevant Rule correctly. However, the penalty under Rule 15(2) was set aside, as the extended period could not be invoked due to no intent to evade duty.

Issue 4: Misunderstanding of legal provisions by the appellant
The Tribunal found that the appellant misunderstood the legal provisions, resulting in incorrect duty payments over five years. Despite instances of both short and excess payments, there was no misdeclaration with intent to evade duty. The Tribunal concluded that suppression of facts could not be invoked, and the extended period for penalty imposition was not justified.

Issue 5: Refund of excess amount paid by the appellant
The Tribunal acknowledged that the appellant had paid an amount in excess of the duty liability before the show-cause notice was issued. As per Section 11A(2B), if the amount paid is subject to verification and the extended period is invoked, the department is obligated to refund the excess amount deposited. Therefore, the Tribunal ruled that the revenue must refund the excess amount paid by the appellant.

In conclusion, the Tribunal allowed the appeal, set aside the penalty imposed under Rule 15(2), upheld the penalty under Rule 15(1), and ordered the refund of the excess amount paid by the appellant.