2014 (3) TMI 278 - AT - Central Excise

Inadmissibility of Cenvat credit - Calculation of inadmisssibility - Bar of limitation - Penalty u/s 11AC - Held that - When the show cause notice is perused, it throws light that only allegation therein is that excess credit was taken - show cause notice has brought the appellant to the scope of allegation. But that does not throw light whether the arithmetical calculation should imput the appellant to the grave of charge of suppression. Said para also does not throw light whether there was any intention to evade which is essential condition of Section 11AC of Central Excise Act, 1944 when the appellant says that part of the demand is time-barred. Therefore, there should not be construction of Para 9 of the show cause notice to be rigorous against the appellant when intention and evasion are companion of each other to speak for themselves as to their association to cause prejudice to Revenue. Absence of one does not make the other to stand. Therefore, there shall not be any penalty under Section 11AC of Central Excise Act, 1944 - remand is made to re-determine the duty demand relating to inadmissibility of Cenvat credit applying proper formula as statutorily mandated and the appellant shall get relief in respect of penalty - Decided in favour of assessee.

Summary

Issues:
1. Inadmissibility of Cenvat credit under Rule 3(7) and Rule 4 of Cenvat Credit Rules, 2004.
2. Recalculation of inadmissibility of Cenvat credit.
3. Penalty imposition due to alleged evasion of duty.

Analysis:

Issue 1: Inadmissibility of Cenvat credit under Rule 3(7) and Rule 4 of Cenvat Credit Rules, 2004
The judgment addresses the issue of inadmissibility of Cenvat credit under Rule 3(7) and Rule 4 of Cenvat Credit Rules, 2004. The appellant's counsel argues that the appellant should have been made aware of the calculation aspect of inadmissibility to provide a proper defense. Both the appellant and the revenue agree that inadmissibility should be calculated according to the statutory formula. The Tribunal decides that the matter should be sent back to the Adjudicating Authority for a recalculation of the inadmissibility of Cenvat credit, ensuring the appellant is given a fair opportunity of hearing.

Issue 2: Recalculation of inadmissibility of Cenvat credit
The judgment highlights the need for the recalculation of the inadmissibility of Cenvat credit. It emphasizes that the calculation aspect of inadmissibility should be confronted to the appellant for defense to prevent prejudice. The Tribunal orders that the Adjudicating Authority should re-determine the duty demand related to the inadmissibility of Cenvat credit by applying the proper statutory formula.

Issue 3: Penalty imposition due to alleged evasion of duty
Regarding the penalty aspect, the appellant argues that there was no deliberate intention to evade duty, attributing the issue to a calculation error and technicality. The appellant contends that part of the demand is time-barred, and therefore, penalty imposition is not justified. The Tribunal examines the show cause notice and finds that it only alleges the taking of excess credit without clear evidence of intention to evade duty. Consequently, the Tribunal rules that there should be no penalty imposed under Section 11AC of the Central Excise Act, 1944. The judgment concludes by partially allowing the appeal, remanding the case for the redetermination of duty demand related to Cenvat credit inadmissibility and relieving the appellant from the penalty. Interest is to follow the duty demand as per the decision.