2016 (10) TMI 182 - AT - Central Excise

Appropriation of amount - clearance of inputs as such on payment of duty on the transaction value rather than reversing the Cenvat Credit availed on such Inputs - duty short paid - differential duty paid before issuance of SCN - Held that - it is the contention of the appellant that the Dept., has not adjusted the excess payment made by them while discharging the duty on the transaction value. However, neither they have established the said claim of excess payment before the authorities below nor they have filed any refund claim in this regard. There cannot be any dispute on the principle that when the Input is cleared as such Cenvat Credit availed on the Inputs is required to be reversed as per Rule 3(5) of Cenvat Credit Rules 2004. Therefore, the differential credit is recoverable from the appellant and there is no discrepancy in the order by the authority below. Invokation of extended period of limitation - imposition of penalty - Held that - However, I find that the Appellant had cleared the inputs on payment of duty on the transaction value and the differential duty was discharged within one year of the initial payment by debiting their CENVAT account in Feb.2009. Also, there is no suppression of fact. Thus, the show cause notice issued after two years of payment for appropriation of the amount cannot lead to an inference that facts had been suppressed and longer period of limitation is attracted. In UOI Vs. Rajastan Spinning & Weaving Mills Ltd. 2009 (5) TMI 15 - SUPREME COURT OF INDIA , it is held that every short payment of duty cannot invite penalty under Section 11AC, in absence of any of the ingredients of Section 11AC of the Central Excise Act,1944. Therefore, penalty under the said provision cannot be sustained in the present case. - Decided partly in favour of appellant

Summary

Issues:
Appeal against confirmation of penalty under Section 11AC of Central Excise Act, 1944 for short payment of duty on Inputs cleared 'as such' under Rule 3(5) of Cenvat Credit Rules 2004.

Analysis:
The appeal was filed against the Order-in-Original passed by the Commissioner (Appeal), Central Excise, Customs and Service Tax-SURAT-II, confirming the demand and imposing a penalty under Section 11AC of the Central Excise Act, 1944. The appellant had cleared Inputs 'as such' during March 2008 to December 2008, paying duty on the transaction value without reversing the Cenvat Credit availed on the Inputs. A Show Cause Notice was issued in 2011 for confirmation of the amount and penalty imposition. The Ld. Commissioner (Appeals) rejected the appeal, leading to the current appeal.

The appellant accepted the mistake of paying duty on the transaction value without reversing the credit availed, citing it as a bonafide error. They argued that any excess duty paid should have been adjusted by the Department against the liability. The appellant contended that since the payment was made in good faith and the differential duty was paid within eleven months before the Notice, penalty under Section 11AC was not justified. The Revenue supported the findings of the Ld. Commissioner (Appeal).

The Tribunal found that there was a shortfall of duty payment amounting to ?6,51,518 due to the difference between the Cenvat Credit availed and duty paid on Inputs cleared 'as such'. The appellant's claim of excess payment was not substantiated or supported by a refund claim. While acknowledging the requirement to reverse Cenvat Credit under Rule 3(5) of Cenvat Credit Rules 2004 when clearing Inputs 'as such', the Tribunal noted that the appellant had discharged the differential duty within a year of the initial payment and without any suppression of facts. Referring to a precedent, the Tribunal held that not every short payment of duty attracts penalty under Section 11AC in the absence of specific conditions. Consequently, the penalty under Section 11AC was set aside, and the appeal was partly allowed in this regard. The impugned order was modified to exclude the confirmation of penalty under Sec. 11AC of CEA, 1944.

In conclusion, the Tribunal ruled in favor of the appellant, partially allowing the appeal by setting aside the penalty under Section 11AC of the Central Excise Act, 1944, due to the absence of suppression of facts and the timely payment of the differential duty.