2018 (7) TMI 1932 - AT - Central Excise

Irregular credit of customs duty paid through DFCE Certificate - introduction of DFCE scheme to accelerate growth in exports by rewarding star export houses - HELD THAT - There is no dispute with regard to the amount of additional duty and education cess paid on the inputs. There is also no dispute regarding the receipt of the goods in the factory of the appellant and used in or in relation to the manufacture of final products, which were subsequently cleared on payment of Excise Duty. Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, provided that the Central Government may, from time to time, formulate and announce by Notification in the Official Gazette, the export and import policy and may also in the like manner, amend that policy. (upto above corrected) . The Central Government by appropriate notification formulate and announce the exim policy 2002-07 and amend the same. Para 3.7.2.1 of the policy provided for DPC scheme and it was amended by notification No. 6(RE)/05/04-09 dated 4.6.2005, whereby Note-8 was inserted, which provided that additional customs duty / excise duty paid in cash or through debit under the DFCE entitlement certificate, would be adjusted as Cenvat credit as per rules framed by the Department of Revenue. The Department of Revenue, by its circular dated 13,10.2006 clarified that Additional Customs Duties paid through debit in certificate issued under DFCE can be availed of as Cenvat credit. The relevant exim policy has a force of law and Adjudicating Authority should have considered the same before holding that Cenvat credit has to be availed and utilized on this strength of notification issued by CBEC. The Notification dated 17.11.2005 amending the basic Notification 53/2003 is a classificatory Notification and should be applied from the date of DGFT Notification. Shortage of goods - It is the case of the appellants i.e. the shortage was due to difference arising on account of weighment on different weigh bridges - HELD THAT - Such percentage of shortage is not made the goods having different calibrations. Penalty u/s 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002 - HELD THAT - There is no ingredient of mis- statement, suppression of facts etc., with an intent to evade payment of duty. Accordingly, no penalty is imposable under section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002. The Cenvat credit of additional customs duty paid under TP Scheme from the date of its operationalization is allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availability of CENVAT credit on additional customs duty paid through DFCE Certificate.
2. Allegation of clandestine removal on account of shortage.
3. Imposition of penalty under relevant rules.

Analysis:

Issue 1: Availability of CENVAT credit
The case involved the appellant, an exporter granted a "Status Holder" certificate under the DFCE Scheme for achieving growth in exports. The appellant imported goods using the DFCE Certificate and debited the additional customs duty from the credit balance. The dispute arose when a Show Cause Notice alleged irregular credit of customs duty. The Tribunal observed that the relevant exim policy allowed adjustment of additional customs duty paid through DFCE Certificate as CENVAT credit. The Department of Revenue also issued clarifications supporting this position. The Tribunal held that the appellant acted in accordance with government notifications and should not be penalized for delays in issuing customs notifications. The benefit of credit was upheld, and the impugned order denying credit was set aside.

Issue 2: Allegation of clandestine removal
Regarding the shortage of goods, the appellant explained that the discrepancy was due to differences in weighment on different weigh bridges, amounting to only 1.15% of the total quantity. The Tribunal noted that such a small percentage of shortage did not indicate any wrongdoing or misstatement to evade duty. Consequently, no penalty was imposed under relevant sections of the Cenvat Credit Rules and Central Excise Rules. The Tribunal allowed the CENVAT credit of additional customs duty paid under the TP Scheme from its operationalization.

Issue 3: Imposition of penalty
Upon reviewing the records, the Tribunal found no evidence of misstatement or intent to evade duty. As a result, no penalty was deemed applicable under the relevant rules. The impugned order was set aside, and the appeal filed by the appellant was allowed with consequential relief. The cross-examination was also disposed of as part of the judgment.

In conclusion, the Tribunal ruled in favor of the appellant, upholding their right to avail CENVAT credit on additional customs duty paid through the DFCE Certificate. The allegations of clandestine removal were refuted due to the minimal discrepancy in goods, and no penalties were imposed for any alleged violations. The judgment provided a detailed analysis of the legal provisions and notifications supporting the appellant's actions, ultimately setting aside the adverse order and granting relief to the appellant.