2019 (12) TMI 1387 - CGOVT - Central Excise

Rebate Claim - export of Pump Set 10 H.P. (I.C. Engine with Centrifugal Pump - demand rasied on account of erroneous rebate resulting from excess duty paid on impugned export goods - Penalty - HELD THAT - The applicant had willfully omitted the classification of the impugned export goods on the excise invoices and ARE-1s and chose to pay higher rate of duty from the CENVAT account so as to encash the available CENVAT credit by way of rebate under Rule 18 of Central Excise Rules, 2002 - It is pertinent to mention that the confirmed demands on account of erroneous rebates have been appropriated by the respondent from the subsequent rebate claims of the applicant. Penalty - HELD THAT - Since the applicant chose to omit the classification of the impugned export goods with an intention to encash the accumulated CENVAT credit by paying higher rate of duty than the applicable rate, the case merits imposition of penalty under Section 11AC of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002 on the applicant. Hence the lower authorities have correctly imposed penalty of ₹ 3,89,603/- under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. Revision dismissed.

Summary

Issues:
1. Classification of goods for export under Central Excise Tariff Heading.
2. Imposition of penalty under Section 11AC of Central Excise Act, 1944.
3. Appropriation of confirmed demands from subsequent rebate claims.

Classification of Goods:
The case involved the clearance of finished goods for export by the applicant under claims of rebate, where the goods were described as "Pump Set 10 H.P. (I.C. Engine with Centrifugal Pump)" without mentioning the Central Excise Tariff Heading (CETH) on the documents. The goods actually fell under CETH 8413 70 10 but were subjected to a higher duty rate of 8% and 10% instead of the applicable 4% rate. The applicant willfully omitted the correct classification to pay higher duty and utilize CENVAT credit for rebate under Rule 18 of Central Excise Rules, 2002.

Imposition of Penalty:
The penalty was imposed under Section 11AC of the Central Excise Act, 1944, which states that if duty has not been levied or paid due to willful misstatement or suppression of facts, the person liable shall pay a penalty equal to the duty determined. The applicant's intentional omission of the correct classification to encash CENVAT credit by paying higher duty warranted the penalty of ?3,89,603 under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002.

Appropriation of Confirmed Demands:
The confirmed demands on account of erroneous rebates were appropriated by the respondent from subsequent rebate claims of the applicant. Despite the applicant's arguments regarding the absence of mens rea and the regular declaration of goods classification in monthly returns, the penalty was upheld due to the intentional misclassification for financial gain. The revision application by the applicant was rejected based on the evidence and discussions presented during the proceedings.

This judgment highlights the importance of accurate classification of goods for duty determination and the consequences of willful misstatements or omissions in the context of claiming rebates under the Central Excise Act, 1944.