2014 (1) TMI 1901 - AT - Central Excise

CENVAT Credit - pet coke sold to customer - denial on the ground that credit could not have been taken without receiving the inputs in the factory - interest - penalty - HELD THAT - In this case, admittedly the inputs were not received in the factory but credit was taken. Therefore, credit was not admissible and should be reversed. However when invoices were raised subsequently, the appellants have reversed the credit and therefore seeking reversal again would mean payment of duty twice on the same goods. The law does not require reversal of the Cenvat credit taken twice by an assessee even if there was a procedural omission on their part. That being the position, the appellant has made out a prima facie case for waiver of the Cenvat Credit amount demanded from them Liability of Interest - HELD THAT - Since the reversal of the credit made at the time of clearance which is in reality not a clearance actually amounts to reversal of credit, interest liability automatically arose and has to be discharged. Penalty - HELD THAT - The law also does not permit raising of invoice on inputs which have not been received in the factory at all. Appellants have done so. Thus the appellants have neither done justice to their own system which they have adopted for accounting nor have they followed the law which is required to be followed in such cases. That being the position, in my opinion, penalty is required to be imposed even though penalty under Section 11AC could not be imposed. The waiver of pre-deposit of Cenvat credit demanded and penalty imposed is granted and stay against recovery is ordered during the pendency of appeal.

Issues: Cenvat credit availed on pet coke sold to a customer without receiving the inputs in the factory, imposition of penalty under Section 11AC of the Central Excise Act, 1944, waiver of pre-deposit and stay against recovery of dues, applicability of interest for delay in reversal of credit, imposition of penalty under Rule 15(2) of CCR read with Section 11AC.

Analysis:

1. Cenvat Credit Availed on Pet Coke Sold to Customer:
The appellant imported pet coke for their own use and for sale. A portion of the pet coke was sold to a customer directly from the port without being received in the factory. The Department initiated proceedings against the appellant for availing Cenvat credit on the pet coke sold to the customer. The appellant argued that there was no revenue loss to the Government as they followed the advice to clear goods only from the factory. The appellant claimed that the procedural mistake was unintentional, and they had reversed the credit when invoices were raised subsequently. The Tribunal found that the appellant had a prima facie case for waiver of the Cenvat credit amount demanded, but interest for the delay in reversal needed to be paid.

2. Imposition of Penalty under Section 11AC:
The learned AR argued that the appellant should have followed the correct procedure, and ignorance of the law is not an excuse. The Tribunal noted that the appellant did not follow their own accounting system, which required goods to be received before accounting. The law also mandates that invoices cannot be raised for inputs not received in the factory. While the penalty under Section 11AC could not be imposed due to limitations in the show cause notice, the Tribunal found that a penalty under Rule 15(2) of CCR could be imposed. However, the requirement of pre-deposit of penalty was waived, and stay against recovery was granted.

3. Waiver of Pre-Deposit and Stay Against Recovery:
The Tribunal granted the waiver of pre-deposit of Cenvat credit demanded and penalty imposed, along with a stay against recovery during the appeal process. The appellant was directed to calculate and deposit any interest payable for the delay in reversal within a specified timeline.

4. Applicability of Interest for Delay in Reversal of Credit:
The Tribunal acknowledged that interest liability arose due to the delay between availing and reversing the credit. The appellant was directed to calculate and pay the interest for the period between availing and reversing the credit. The Tribunal also noted that the demand was time-barred due to the issuance of the show cause notice beyond the normal period of limitation.

5. Imposition of Penalty under Rule 15(2) of CCR:
While the penalty under Rule 15(2) of CCR read with Section 11AC was proposed in the show cause notice, the Tribunal found that it could not be imposed beyond the proposal. The penalty was deemed not imposable, and the pre-deposit requirement of penalty was waived, with a stay against recovery granted.

In conclusion, the Tribunal granted the waiver of pre-deposit for Cenvat credit and penalty, ordered a stay against recovery during the appeal, and directed the appellant to calculate and pay any interest due for the delay in reversing the credit.

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