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2015 (4) TMI 419 - AT - Central ExciseCENVAT Credit - removal of inputs as such - appellant having availed CENVAT Credit of Special Additional Duty (SAD) did not reversed the same while removing the components to their co-makers. - credit was reversed later before issue of SCN - demand of interest and penalty - Held that - show-cause notice had invoked wrong provisions to recover the short paid SAD. The impugned order confirmed the proposal to demand irregular cenvat credit taken by the assessee. The amount involved is not irregular credit nor so utilized. We find that the demand of duty of ₹ 2,12,40,288/- and penalty imposed are not in accordance with law, since the same has been ordered invoking inapplicable provisions. We vacate the demand of so called irregular cenvat credit availed by the assessee. Consequently, demand of interest also stands vacated. Reliance placed on the case of LG Electronics Pvt. Ltd. (2010 (3) TMI 536 - CESTAT, MUMBAI) is correct. On reading of the entire case as reported we find that the facts are identical to the facts and issue in hand. It is to be noted that in the case of LG Electronics Pvt. Ltd. (2010 (3) TMI 536 - CESTAT, MUMBAI) the demand was raised under the same proviso i.e. Rule 14 of Cenvat Credit Rules, 2004 read with the provisions of Section 11A(1) of the Central Excise Act, 1944 invoking extended period by alleging suppression of facts with intention to evade duty. - In yet another case of Cosmo Films Ltd (2009 (10) TMI 300 - CESTAT, MUMBAI), the same issue of non-discharge of 4% of CVD was in dispute. The assessee in that case has pleaded that the mistake was bonafide and credit was available to the sister unit hence the issue is of revenue neutral situation. - impugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.
Issues Involved:
1. Non-reversal of Special Additional Duty (SAD) on removal of imported components. 2. Alleged suppression of facts with intent to evade duty. 3. Applicability of penalties and interest under Rule 14 of Cenvat Credit Rules, 2004 and Section 11A of the Central Excise Act, 1944. 4. Revenue neutrality and its implications. Issue-wise Detailed Analysis: 1. Non-reversal of Special Additional Duty (SAD) on removal of imported components: The main appellant, M/s. MIRC Electronics, imported various items like color picture tubes, components, and accessories, which were then sent to co-makers for the manufacture of color TV sets. The appellant availed CENVAT Credit of SAD on these imports but did not reverse the same when removing the components to co-makers. This non-reversal was attributed to a software malfunction that did not account for SAD. The appellant detected this issue on May 30, 2006, and began paying the duty by TR-6 challan. The appellant argued that this was an inadvertent error due to the software glitch and not an intentional evasion of duty. 2. Alleged suppression of facts with intent to evade duty: The Departmental Representative argued that the appellant, being aware of the software problem, should have informed the department, suggesting suppression of facts with intent to evade duty. However, it was noted that the appellant was actively trying to resolve the software issue and had already started paying the duty. The Tribunal found that the appellant's actions did not constitute suppression of facts with intent to evade duty, as they had discharged the appropriate CVD/Central Excise duty on the components. 3. Applicability of penalties and interest under Rule 14 of Cenvat Credit Rules, 2004 and Section 11A of the Central Excise Act, 1944: The show-cause notice invoked Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944, to demand the amount equivalent to the SAD on the components cleared to co-makers. The Tribunal referred to the case of LG Electronics Pvt. Ltd. v. CCE Pune III, where a similar issue was resolved in favor of the appellant. The Tribunal held that the non-reversal of SAD was not with the intention to evade duty, and thus, the extended period for demanding duty and the imposition of penalties under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, were not applicable. 4. Revenue neutrality and its implications: The appellant argued that the entire exercise of demanding SAD from them was revenue-neutral since the co-makers availed CENVAT Credit and discharged duty liability on the color TVs based on the appellant's MRP. The Tribunal found merit in this argument, noting that the co-makers had already availed CENVAT Credit paid by the appellant on supplementary invoices. The Tribunal also referred to the case of Cosmo Films Ltd. v. CCE, where a similar issue was considered revenue-neutral, and penalties were set aside. Conclusion: The Tribunal concluded that the impugned order was unsustainable and set it aside. The appeals were allowed, and it was pronounced that the appellant's actions did not constitute suppression of facts with intent to evade duty, and the demand of duty invoking the extended period was barred by limitation. Consequently, the demand of interest and penalties was also not sustainable. The Tribunal emphasized the revenue-neutral nature of the case and the appellant's bona fide actions in addressing the software glitch and paying the duty.
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