2008 (3) TMI 209 - AT - Central Excise

Demand - Credit wrongly reversed amount which was reversed in excess is sanctioned as refund by commissioner two SCN issued relating to refund claim and relating to demand of whole amount - time gap between them is too small for the assessee to plead limitation - not found the requisite correlation between the balance amount of credit and the inputs said to have been received in the factory - Credit already reversed cannot therefore be refunded demand for balance amount is justified

Summary

Issues:
1. Reversal of Modvat credits by the assessee during internal audits.
2. Rejection of refund claims by the Assistant Commissioner.
3. Appeals filed by both the assessee and the Revenue against the Orders-in-Original.
4. Show-cause notice proposing demand of duty and penalty against the assessee.
5. Dispute regarding the demand of duty and penalty imposed by the Commissioner.
6. Imposition of penalty and interest under relevant provisions of the Central Excise Act.

Analysis:

1. The judgment involves the reversal of Modvat credits by the assessee during internal audits. The internal auditors found irregularities in the input-duty credits wrongly taken by the party. The total amount of Modvat credit found to have been wrongly availed was Rs. 26,58,407/-. The credits were reversed during the audits, but later, the assessee found that certain credits should not have been reversed. Refund claims were filed for these amounts, leading to a jurisdictional Assistant Commissioner issuing show-cause notices proposing to reject parts of the refund claims, which were contested by the party.

2. The Assistant Commissioner passed separate orders rejecting parts of the refund claims, leading to appeals by both the assessee and the Revenue to the Commissioner (Appeals). The Commissioner (Appeals) allowed the assessee's appeals, leading to further appeals by the Revenue to the Tribunal. The Tribunal dismissed the Revenue's appeals, upholding the Commissioner (Appeals) orders in favor of the assessee.

3. Another issue involved the rejection of refund claims by the Assistant Commissioner, leading to appeals by the assessee against the order passed by the Commissioner. The Tribunal examined the records and found that a total amount of duty of Rs. 12,55,743/- was allowed to the assessee, part of the total amount demanded by the Commissioner. The Tribunal set aside the Commissioner's demand to the extent of Rs. 12,55,743/-, but sustained the balance amount of Rs. 14,12,184/-, which included amounts reversed by the party in the Modvat account and PLA during audits.

4. The judgment also addressed a show-cause notice issued by the Commissioner proposing a demand of duty and penalty against the assessee. The Commissioner upheld the proposals and imposed a penalty of Rs. 25 lakhs on the party. The assessee appealed against the Commissioner's order, leading to a detailed examination by the Tribunal.

5. The Tribunal found that the demand of duty amounting to Rs. 14,12,184/- was sustainable, as there was no correlation between the credited amount and the inputs used in manufacturing. The Tribunal also addressed the penalty imposed by the Commissioner, setting it aside based on the payment of duty before the show-cause notice and vacating the interest demanded under relevant provisions of the Central Excise Act.

6. In conclusion, the Tribunal disposed of the assessee's appeal by modifying the Commissioner's order, setting aside the penalty and interest imposed, and upholding the demand of duty to the extent of Rs. 14,12,184/-. The judgment clarified various legal aspects and upheld the decisions made at different stages of the dispute resolution process.