2016 (6) TMI 544 - AT - Central Excise

Clearance of goods to sister establishment - Non reversal of credit on such goods before clearance - Held that - It cannot be said that it is entirely revenue neutral situation. In given point of time, they had sufficient credit balance in their PLA, which was far greater than amount taken as CENVAT Credit is irrelevant as the two accounts are totally independent accounts and if the amount in the CENVAT Credit is utilized, it will only result in increase the availability in the PLA accounts. The show-cause notice alleged that the fact regarding clearance without payment of duty was not informed to the department nor mentioned in the monthly ER-1 returns to prove the intention to evade payment of duty of the said goods. We do not find any evidence from Revenue to support the assertion that the appellants were required to give this information in the ER-1 returns. The said ER-1 returns are not part of the relied upon documents. Furthermore, it has not been established as to which entry in ER-1 were wrong or erroneous. The Order-in-Original asserts that the appellant had not submitted the invoices on which credit has been availed to the department. However, they have not pointed out that in what provisions of law was it necessary to submit the said invoices. In fact during the said period, there is no requirement of submitting any invoices. The appellants are Public Sector Undertaking and in most of the clearances listed in the show-cause notice, the credit of the duty paid was admissible to the refund unit and the situation was revenue neutral. Imposition of penalty is non justified. - Decided partly in favour of assessee.

Summary

Issues:
1. Time-barred show-cause notice
2. Revenue neutrality and intention to evade payment of duty
3. Obligations of a Public Sector Undertaking
4. Imposition of penalty

Analysis:

1. Time-barred show-cause notice:
The appellant argued that the show-cause notice was time-barred as the period in dispute was May 2005 to October 2007, while the notice was issued on 4.12.2009. The appellant contended that since the situation was revenue neutral and the sister units were entitled to take credit, there was no intention to evade payment of duty. The appellant cited a Supreme Court decision to support the argument that reversing CENVAT credit before utilization does not attract interest. The Tribunal noted the discrepancy in the dates and lack of intention to evade payment, ultimately leading to the dismissal of the penalty.

2. Revenue neutrality and intention to evade payment of duty:
The appellant had cleared goods to both sister manufacturing units entitled to credit and terminals not eligible for credit. The Tribunal found that the situation was not entirely revenue neutral due to clearances to non-entitled terminals. The appellant's substantial credit balance in their PLA was highlighted, indicating the independence of PLA and CENVAT Credit accounts. The Tribunal observed a lack of evidence supporting the assertion that the appellant was required to inform the department of clearances without payment of duty. Additionally, discrepancies in the submission of invoices were not proven to be legally required during the relevant period. The Tribunal concluded that the situation was largely revenue neutral, leading to the partial allowance of the appeal.

3. Obligations of a Public Sector Undertaking:
The Assistant Commissioner argued that the appellant, a large-scale Public Sector Undertaking, should have been aware of the legal obligations and changes in law. Citing a High Court decision, it was emphasized that ignorance of law cannot be a ground to avoid tax liability. The Tribunal acknowledged the expectations from a Public Sector Undertaking but ultimately focused on the specific circumstances of the case to determine the imposition of the penalty.

4. Imposition of penalty:
Considering the peculiar circumstances, including the revenue neutrality and lack of evidence regarding intentional evasion, the Tribunal found that the imposition of the penalty was not justified. Consequently, the appeal was disposed of with the penalty being partially allowed, indicating a balanced approach in addressing the issues raised in the case.

This detailed analysis of the judgment provides insights into the legal reasoning and considerations that led to the decision by the Appellate Tribunal CESTAT MUMBAI.