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2014 (3) TMI 745 - AT - Central ExciseDenial of CENVAT Credit of SAD - removal of inputs as such without reversing SAD - Mala fide intention of assessee.- Held that - When goods are imported SAD has to be paid except in some special cases. Where SAD is paid the importer can take credit of such duty under Cenvat Credit Scheme if he is a manufacturer, consuming the imported goods in his manufacturing process. There is also a provision that if the importer sells the goods on payment of VAT, he can claim refund of such SAD paid, from Customs Authorities by producing evidence of VAT paid. In this case goods were sold and not consumed in manufacture. So the latter course of action should have been taken for getting relief from the incidence of duty which need not be borne by the respondents. This is case of choosing wrong course of action rather than attempt at evasion of duty - Decided against Revenue.
Issues:
1. Availing Cenvat credit on imported goods. 2. Reversal of duty on imported goods. 3. Recovery of duty under Section 11A(1) of the Central Excise Act. 4. Imposition of penalty under Section 11AC of the Act read with Rule 15 of Cenvat Credit Rules, 2004. 5. Reduction of penalty by the Commissioner (Appeals). 6. Validity of the grounds for imposing a lesser penalty. Analysis: 1. The respondents, as manufacturers of Steel Tubes and Pipes, availed Cenvat credit on imported H.R. Steel Strips under the Cenvat Credit Rules, 2004. They took credit of Additional Duty of Customs equal to Central Excise duty and Educational Cess during a specific period. However, at the time of clearance, they did not reverse duty equivalent to Special Additional Duty of Customs, which was later rectified upon inspection by officers. 2. Subsequently, a Show Cause Notice (SCN) was issued to the respondents, questioning the recovery of the un-reversed duty amount under Section 11A(1) of the Central Excise Act and the imposition of a penalty under Section 11AC of the Act read with Rule 15 of Cenvat Credit Rules, 2004. The SCN was adjudicated by confirming the demand and imposing a penalty, which was later reduced by the Commissioner (Appeals). 3. The main ground of appeal was that the credit was taken after the goods had been removed from the factory, suggesting a mala fide intention. It was argued that the respondents only reversed the amount upon detection by officers, indicating a lack of genuine intent. 4. The respondent's counsel explained that they believed they were eligible for a refund of the Special Additional Duty (SAD) paid, as they had already paid VAT upon selling the goods. They claimed to have no mala fide intention, and the penalty reduction by the Commissioner (Appeals) was justified based on this argument. 5. Importantly, it was clarified that when goods are imported, SAD is generally paid unless specific exemptions apply. Importers can claim credit under the Cenvat Credit Scheme if the goods are used in manufacturing. However, in cases where goods are sold and not used in manufacturing, the correct course of action is to claim a refund of the SAD paid by providing evidence of VAT payment. 6. Ultimately, the Tribunal rejected the appeal, finding no merit in the Revenue's argument to increase the penalty on the respondents. It was concluded that the case involved a choice of the wrong course of action rather than an attempt to evade duty, justifying the imposition of a lesser penalty as determined by the Commissioner (Appeals).
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