2014 (4) TMI 762 - AT - Central Excise

CENVAT Credit - Penalty u/s 11AC - discharge of 25% of the amount confirmed as duty liability - Held that - appellant needs to pay interest as the provisions of Section 11AB will apply in this case even if cenvat credit is reversed before the issuance of show cause notice. Accordingly, we hold that the appellant is also liable to pay interest on the amount of duty liability which has been confirmed. Adjudicating authority will quantify and convey the amount of interest payable by the appellant as early as possible and on such communication, appellant will pay the interest within thirty days and report compliance to the adjudicating authority - if the lower authorities have not extended the benefit of discharge of 25% of the amount of the duty liability as penalty as provided under Section 11AC of the Central Excise Act, 1944, Tribunal is at liberty to extend these benefits to assessee-appellant. From the records we find both the lower authorities have not extended this benefit to the appellant. Accordingly, respectfully following the ratio of the Hon ble High Court of Gujarat 2009 (1) TMI 113 - GUJARAT HIGH COURT we extend the benefit of payment of 25% of the amount of the duty liability as penalty within thirty days from the date of receipt of this order - Decided partly in favour of assessee.

Summary

Issues:
1. Availment of cenvat credit on damaged raw materials.
2. Reversal of cenvat credit and duty liability.
3. Imposition of penalties on individuals.
4. Applicability of Section 11AC for duty liability.
5. Payment of interest on confirmed duty liability.

Analysis:

Availment of Cenvat Credit on Damaged Raw Materials:
The appellants, engaged in manufacturing motor vehicles, were availing cenvat credit on raw materials damaged in transit and claimed insurance inclusive of excise duty. Upon investigation, it was revealed they had availed duty credit and claimed excise duty with the insurance company. The appellants admitted to availing cenvat credit on damaged materials and reversed the duty amount. The issue revolved around the reversal of credit for the period pre and post-April 2004.

Reversal of Cenvat Credit and Duty Liability:
A show cause notice was issued for recovery of cenvat credit and education cess. The adjudicating authority confirmed the demands, imposed penalties, and ordered recovery of interest. The first appellate authority set aside penalties on individuals but upheld the duty demand, interest, and penalty. The appellant did not contest the reversed amount but sought the benefit of Section 11AC for discharging 25% of the confirmed duty liability.

Imposition of Penalties on Individuals:
Show cause notices were issued for penalties on individuals, with the first appellate authority setting aside penalties but confirming duty demands, interest, and equivalent penalties. The appellant appealed against the penalty imposition on individuals.

Applicability of Section 11AC for Duty Liability:
The appellant sought the benefit of Section 11AC for discharging 25% of the confirmed duty liability and expressed readiness to pay within thirty days. The Tribunal considered the appellant's submission and extended the benefit based on the High Court's decision in a similar case.

Payment of Interest on Confirmed Duty Liability:
The Tribunal held that the appellant was liable to pay interest on the confirmed duty liability under Section 11AB, even if the cenvat credit was reversed before the show cause notice. The adjudicating authority was directed to quantify the interest payable, and the appellant was instructed to pay within thirty days.

In conclusion, the Tribunal upheld the confirmation of duty demands, directed payment of interest on the duty liability, and extended the benefit of Section 11AC for penalty payment. The appeal was disposed of with instructions for compliance with the orders.