2016 (10) TMI 645 - AT - Central Excise

Demand of duty - Rule 8 of Central Excise Rules, 2001 - the facility of fortnightly payment of duty and payment through RG 23A Part II for a period two months or till the deposit of defaulted amount which ever later was withdrawn - appellant took credit in their PLA account without actually deposit of the same through TR-6 challan manipulation of account current and misleading Held that - the appellant has paid whole of the defaulted amount alongwith interest on 17.10.2001. These facts are evident from RT-12 returns and the same has not been disputed by the adjudicating authority. In that circumstance, as the appellant has made the whole of dues within one month, therefore, the appellant is entitled to utilize their cenvat credit account for payment of duty with effect from 24.11.2001 - the appellant started utilising the account current with effect from 18.1.2002, in that circumstance, the appellant has not contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2001 by utilizing the credit account for payment of duty with effect from 18.1.2002, therefore, the demand of ₹ 1,69,38,241/- is not sustainable - Demand set aside - no penalty imposable. Manipulation of account current - fraudulent credit taken in account current on TR-6 challan and an amount of ₹ 1,69,38,241 has been utilized by the appellant from their cenvat credit account for payment of duty demand of said amount along with interest and imposition of penalty Held that - the appellants were receiving the communication from their head office with regard to the payment of duty through TR-6 challan telephonically wrongly and therefore, they have taken the credit i.e .due to mistake of the concerned official - although there may be mistake of the appellants but the appellants cannot take the benefit of the same as they have taken the credit in the PLA without making payment. In the circumstances, the penalties are imposable on the appellants. Further, the whole of the amount in dispute was paid alongwith interest before issuance of show cause notice, thus, the penalty is reduced to 25% of ₹ 1,63,00,000/- Imposition of penalties on co-appellants Held that - co-appellants are the responsible officials of the appellant company. They have admitted their mistake, in that circumstance, the imposition of nominal penalty on both the appellants shall meet the end of justice - the penalties on both the appellants confirmed for their mistake to the tune of ₹ 50,000/- Appeal disposed off decided partly in favor of appellants.

Summary

Issues:
- Duty demand based on fraudulent credit in account current without valid TR-6 challan support
- Utilization of cenvat credit for payment of duty without clearing defaulted amount
- Imposition of penalties on appellants and co-appellants

Analysis:
1. The appellants were in appeals against an order demanding duty of ?1,63,00,000/- due to fraudulent credit taken in their account current without valid TR-6 challan support and utilizing it for central excise duty payment. An additional demand of ?1,69,38,241/- was confirmed for utilizing cenvat credit without clearing defaulted amounts, with penalties imposed. The appellants contested the order.

2. The facts revealed that the appellants manipulated their account current to show payment of defaulted amounts and used cenvat credit wrongly for duty payments. The appellants argued they had paid defaulted amounts and were entitled to utilize cenvat credit. The respondent contended the credit was fraudulent and penalties were justified for not providing TR-6 challan.

3. After considering submissions, it was found that the defaulted amount was paid timely, allowing cenvat credit use from a specified date. The appellants' use of the account current was not a violation, leading to setting aside the demand of ?1,69,38,241/- and no penalty imposition for this charge. The excess credit taken without TR-6 was acknowledged and paid with interest, but penalties were debated.

4. The respondent opposed penalty waiver, citing fraudulent credit in the PLA account. The tribunal noted the mistake but deemed penalties necessary for unauthorized credit use. The penalties were reduced due to the amount being paid before the show cause notice, with a 25% penalty imposed on the appellants.

5. Penalties were also imposed on co-appellants, with their roles not specified clearly. The responsible officials admitted mistakes, leading to nominal penalties of ?50,000/- each. The appeals were disposed of with these terms, emphasizing penalty payment within the designated period.

By analyzing the issues of duty demand, cenvat credit misuse, and penalty imposition on appellants and co-appellants, the tribunal provided a detailed judgment based on the facts and legal arguments presented during the proceedings.