2014 (9) TMI 684 - AT - Central Excise

Duty of excess clearance of goods beyond SSI exemption - Benefit of MODVAT Credit - benefit of abatement towards sales tax paid on the sale of goods - Computation of duty - Penalty u/s 11AC - Held that - From the records, the appellant themselves have admitted to a duty liability to ₹ 6,27,728/- in their reply dated 26-3-1999 and a reduced liability of ₹ 5,21,149.25 in their reply dated 24-9-1999. Thus, the appellant have been adopting changing stands in their replies, but the fact remains that the appellant did exceed the exemption limit of ₹ 30 lakhs and did not discharge the excise duty liability. In the absence of any evidence to the contrary led by the appellant, the only conclusion that can be reached is that the duty demands computed by the lower authorities are correct. It is on record that during material period, the appellant was not registered with the department nor were they following any of the statutory procedures prescribed for availing of Modvat Credit. Modvat scheme as it stood at the relevant time envisaged filing of declaration, maintenance of records showing receipt of the goods, consumption of goods for manufacture, filing of returns indicating the amount of duty paid through the credit account and other statutory requirements. When none of these requirements have been complied with by the appellant, we do not understand how he can claim the benefit of Modvat Credit. In view of the above legal and factual position, we are of the considered view that the appellant is not eligible for the benefit of Modvat Credit on the inputs used in the manufacture of pipes which was manufactured and cleared by them clandestinely, without payment of duty. Whether the appellant is liable to penalty under Section 11AC of the Central Excise Act especially when the said provision came into the statute book only with effect from 28-9-1996 - In the show cause notice the proposal is for imposition of penalties under Section 11AC read with Rule 173Q of the Central Excise Rules, 1944. Rule 173Q as stood at the material point of time provided for imposition of penalty up to five times the value of the goods clandestinely removed. However, in the impugned order penalty has been sought to be imposed only equal to the duty sought to be evaded. Since penalty has been imposed within the limits prescribed by the law as it stood at the material point of time, the same cannot be faulted. Therefore, imposition of penalty equal to the duty for the period prior to 28-9-1996 can be clearly sustained under Rule 173Q and for the period on or after 28-9-1996, the same is sustainable under Section 11AC of the Act. - Decided against assessee.

Summary

Issues:
- Duty demand computation
- Abatement towards sales tax
- Cum-duty price benefit
- Modvat Credit eligibility
- Penalty under Section 11AC

Duty demand computation:
The appellant exceeded the exemption limit and did not discharge the excise duty liability. The lower appellate authority confirmed a duty demand of &8377; 9,89,222 along with interest and penalty. The appellant claimed duplication of demand due to computation based on delivery challans and commercial invoices. However, the appellant admitted to a duty liability in their replies. The duty demands computed by the lower authorities were deemed correct.

Abatement towards sales tax:
The lower appellate authority allowed abatement towards sales tax payable. The appellant contended for the benefit of abatement towards sales tax paid on goods sold. The authority held that after allowing the abatement, the remaining Central Excise duty is recoverable along with an equivalent penalty and interest.

Cum-duty price benefit:
The appellant claimed the benefit of cum-duty price, citing various judicial pronouncements. The appellant argued that the entire amount received should not be treated as taxable. However, the absence of evidence showing prices inclusive of excise duty led to the rejection of the cum-duty benefit claim.

Modvat Credit eligibility:
The appellant asserted eligibility for Modvat Credit on inputs used in manufacturing pipes. The appellant was not registered or followed prescribed procedures for availing Modvat Credit. Legal precedents emphasized strict compliance with statutory procedures for claiming benefits. As the appellant did not comply with requirements, the claim for Modvat Credit was dismissed.

Penalty under Section 11AC:
The appellant challenged the penalty imposition under Section 11AC, citing its enactment post the relevant period. The penalty imposed was within the limits prescribed by law at the time. The penalty equal to the duty for the period before and after 28-9-1996 was deemed sustainable under Rule 173Q and Section 11AC, respectively.

In conclusion, the appeal was dismissed as the legal and factual analysis did not support the appellant's contentions. The duty demands were upheld, and the appellant was found ineligible for cum-duty price benefit and Modvat Credit. The penalty imposition under Section 11AC was deemed appropriate based on the legal provisions applicable during the relevant periods.