2015 (10) TMI 286 - AT - Central Excise

Short reversal of SAD - On the Department pointing out the mistake in September, 2006, the assessee made good the short payment - clearances of the imported inputs to ancillary units for manufacture of PCBs - Interest u/s 11AB - Penalty u/s 11AC - Held that - Demand in this case is barred by limitation. Further, as the appellant were having sufficient balance in their Cenvat Credit Account, the demand of interest is also not sustainable. Further, as the show cause notice was also issued by invoking extended period of limitation, therefore, penalty on the appellant is not imposable. It is also noted here that as the appellant has reversed the Cenvat credit of SAD, which has ultimately taken up by the buyer in that case, consequent to this order, the appellant will not avail cenvat credit again in SAD in their Cenvat Credit Account - Decided partly against assessee.

Issues:
1. Short reversal of Special Additional Duty (SAD) on imported inputs by the appellant.
2. Demand of duty, interest, and penalty by the Commissioner under Cenvat Credit Rules, 2004.
3. Failure to update software leading to non-payment of SAD.
4. Comparison with a similar case in the Pune unit.
5. Applicability of limitation period for the demand of duty, interest, and penalty.
6. Consideration of sufficient balance in Cenvat Credit Account for interest demand.
7. Imposition of penalty based on the extended period of limitation.

Analysis:

1. The appellant, engaged in manufacturing color television sets, imported electronic components and short reversed SAD on clearances to ancillary units for PCB manufacture. The authorities alleged intentional short payment, leading to a demand of Rs. 5,44,82,338 along with interest and penalty under Cenvat Credit Rules, 2004.

2. The appellant argued that a software error caused the non-payment of SAD after an exemption withdrawal in March 2006. They rectified the error upon discovery in September 2006, maintaining excess credit in their Cenvat account, indicating no wrongful intention to avail Cenvat credit.

3. The appellant cited a favorable Tribunal judgment from their Pune unit, supported by the Bombay High Court and Apex Court decisions, where a similar demand was deemed time-barred due to limitation, questioning the justification for interest and penalty imposition.

4. The Departmental Representative upheld the impugned order, emphasizing the findings against the appellant's contentions.

5. After hearing both sides, the Tribunal noted the Pune unit's case where the appellant had rectified the credit reversal before the show cause notice. The demand was considered time-barred, and interest and penalty were deemed unsustainable due to the appellant's sufficient Cenvat Credit Account balance.

6. The Tribunal concluded that the demand was barred by limitation, and the interest demand was unjustified given the available credit balance. As the show cause notice invoked an extended limitation period, penalty imposition was deemed inappropriate. The appellant's reversal of SAD credit prevented future availing, settling the appeal.

This detailed analysis of the judgment outlines the issues, arguments, and the Tribunal's decision, providing a comprehensive understanding of the legal aspects involved in the case.

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