2016 (11) TMI 921 - AT - Central Excise

Demand of interest and penalty - credit availed on inputs transferred to other unit - reversal of the said credit on being pointed out after a year and a half - Held that - the Cenvat Credit Rules are very unambiguous and clear. There is not an iota of doubt about the manner in which the credit is required to be taken in such cases and the amount of credit are required to be taken when the same goods are received. The appellant s contention that it was an inadvertent error does not appear to logic as there is no ambiguity in law, so far as the availment of credit in these circumstances are concerned. This is also apparent from the fact that the moment it was pointed out the appellant was paid the same and not contested on merit. It is seen that the appellants are very well conversant with the process - Every time the inputs are cleared as such, the appellant is required to make invoice and the invoice contains the column where the duty reversed is to be mentioned. It is not something which can slip out of mind inadvertently. In this era of self assessment great trust has been placed on the assessee to do self assessment diligently and properly. In the instant case, it is apparent that the other unit to which the material was transferred could not have benefited by taking the credit of the said duty. In these circumstances, the intention to evade duty is apparent. Section 11A (2B) not applicable to the cases where the duty was short paid for reasons of fraud, collusion or any mis-statement or suppression of facts, as is apparent in this case - appeal dismissed.

Summary

Issues:
1. Availment of credit for transferred materials.
2. Application of Section 11A (2B) of the Central Excise Act.
3. Allegations of suppression of facts.
4. Interpretation of Cenvat Credit Rules regarding credit availing process.

Analysis:
1. The case involved an appellant who imported Lauric Acid and transferred a portion to another unit. The appellant availed credit for the entire quantity, including the transferred amount. Upon audit detection, the appellant reversed the credit and paid interest. A show-cause notice was issued for confirmation of reversal, interest payment, and penalty imposition. The original and appellate authorities confirmed the reversal, interest payment, and penalty, leading the appellant to appeal to the Tribunal.

2. The appellant argued that their actions fell under Section 11A (2B) of the Central Excise Act, which allows payment of duty before notice service, absolving from penalty. The appellant contended that mere allegations of suppression were insufficient, requiring proof from the Revenue. However, the Revenue argued that the transferred unit did not benefit from the duty credit, emphasizing the clear law application without room for misinterpretation.

3. The Tribunal found the Cenvat Credit Rules unambiguous, emphasizing the clear procedure for credit availing when goods are received. The appellant's claim of inadvertent error was dismissed due to the lack of ambiguity in the law. The Tribunal noted the appellant's familiarity with the process, as indicated in their appeal statement. The requirement to mention reversed duty on invoices highlighted the need for diligent self-assessment by the assessee.

4. The Tribunal determined that the transferred unit could not have benefited from the duty credit, indicating an intention to evade duty. Section 11A (2B) was deemed inapplicable in cases of short payment due to fraud, collusion, misstatement, or suppression of facts, as evident in this case. Consequently, the appeal was dismissed, emphasizing the importance of diligent compliance with duty payment regulations.