2016 (1) TMI 433 - AT - Central Excise

Demand of interest and penalty - Clandestine removal of goods - Revenue neutrality - Held that - Appellants removed the semi-finished goods continuously for about three years without payment of duty and the input was cleared as such without reversal of credit in violation of the Central Excise Rule 2002 and the Cenvat Credit Rules 2004. There is no dispute that the appellant was liable to pay duty and reverse credit at the time of clearance of semi-finished goods and therefore, the demand of interest is justified. The demand of interest cannot be waived on the ground of the Revenue neutrality. - It is revealed from the Adjudication order that the appellant submitted the statement showing month-wise details of payment of duty from Cenvat account and PLA in respect of both the units during the material period. It is also recorded that the sister unit had paid more duty from the PLA than the Cenvat account. The appellant claimed that there is no suppression of the fact with intent to evade any payment of duty as it is a case of Revenue neutrality. The Adjudicating Authority observed that there is some merits in the argument of the appellant. Hence, the imposition of penalty under Section 11AC is not warranted - demand of duty alongwith the interest is upheld and the penalty is reduced - Decided partly in favour of assessee.

Summary

Issues:
Violation of Central Excise Rule 2002 and Cenvat Credit Rules 2004 regarding clearance of goods without duty payment and credit reversal; Imposition of penalty and interest; Application of Revenue neutrality principle; Dispute on penalty imposition and interest demand.

Analysis:

1. The case involved M/s Nesco Ltd, which was found to have cleared semi-finished goods to their sister unit without discharging duty, violating Central Excise Rule 2002 and Cenvat Credit Rules 2004. The audit revealed this practice from 2005-06 to 2007-08, leading to a show cause notice for duty demand, Cenvat credit reversal, interest, and penalties.

2. The Adjudicating Authority confirmed the duty demand, Cenvat credit, interest, and penalties, which was upheld by the Commissioner (Appeals). The appellant contended that they had paid duty and reversed credit before the show cause notice, arguing for Revenue neutrality citing specific legal precedents.

3. The appellant's argument centered on Revenue neutrality, asserting that the sister unit had paid more duty than demanded from the appellant. The Authorized Representative for the Revenue opposed this, emphasizing the necessity of credit reversal on input clearance and the appellant's repeated violation of duty payment obligations.

4. The Tribunal found that while the duty demand was justified, the appellant's contention on penalty imposition had merit. Citing legal precedents and the appellant's submission of payment details, the Tribunal concluded that penalty under Section 11AC was not warranted, but a penalty for contravention of rules over three years was imposed.

5. Consequently, the impugned order was modified to uphold duty demand with interest, reduce the penalty to &8377;25,000 on the appellant-company, and allow the appeal filed by Appellant No 2. The penalty on the employee of the appellant company was not sustained, and the appeal by the appellant was disposed of accordingly.