2016 (12) TMI 146 - AT - Central Excise

CENVAT credit - The appellants received the waste paper, waste cuttings etc. from their sister units namely M/s APPM, (PSC unit) Serinarasannapalem, and M/s A.P.Paper Mills Ltd(APPM) Rajamundhry - these two sister concerns passed on excess Cenvat credit by paying Cenvat duty at higher rate of 10%, instead of paying the concessional rate of duty @ 4% and 5% as per the exemption notification - Held that - The period involved is April, 2010 to October, 2011 and the show cause notice has been issued on 13.9.2012. It is not disputed that the appellant had paid higher rate of duty for their inputs during the relevant period. So also, there is no allegation made out in the show cause notice that the appellant had willfully suppressed or misstated, with an intention to evade payment of duty. More over, there is strength in the findings of original authority that the appellant had no malafide intention while availing the alleged excess credit - the demand raised, invoking the extended period of limitation in my view is unsustainable - The issue of limitation having been answered in favour of the respondent, I do not think it necessary to delve into the issue on merits - appeal dismissed - decided against Department.

Summary

Issues:
- Allegation of passing on excess Cenvat credit by paying duty at a higher rate
- Demand of excess duty, interest, and penalty imposed by the Original Authority
- Commissioner (Appeals) setting aside the demand, interest, and penalty
- Ambiguity in the exemption notification and doubt regarding its applicability
- Appellant's payment of higher rate of duty due to ambiguity in notification
- Lack of malafide intention in paying excess duty or availing excess credit
- Extended period of limitation for demand raised by the department

Analysis:
1. The case involved the appellants, manufacturers of paper and paperboard, who were availing Cenvat credit on inputs, capital goods, and input services. The issue arose when the sister units of the appellants cleared raw materials, specifically waste paper, on payment of Cenvat duty at a higher rate of 10% instead of the concessional rates of 4% and 5% as per exemption notifications dated 29-04-2010 and 01-03-2011. This led to an allegation by the department that excess Cenvat credit was passed on, resulting in a show cause notice being issued for the demand of excess duty, interest, and penalty.

2. The Original Authority confirmed the demand of excess duty along with interest and imposed a penalty of ?22,30,172/- and ?10,000/- respectively. The department, represented by the Learned AR, strongly defended the findings, arguing that the appellants should have availed the exemption and paid duty at the lower rates during the relevant period. The department contended that by paying duty at a higher rate, the appellants availed excess credit, which was impermissible under the law.

3. In response, the counsel for the respondents argued that the Commissioner (Appeals) rightly set aside the demand, interest, and penalty. The counsel highlighted that the case was similar to precedents where ambiguity in exemption notifications led to doubts regarding applicability. The appellants had paid higher duty rates on imports of the same goods during the period, further supporting their contention of ambiguity. It was noted that the appellants had informed the jurisdictional Range Officer about the ambiguity and provided necessary details to the department, emphasizing the lack of malafide intention in paying excess duty or availing excess credit.

4. The tribunal, after hearing both sides, considered the period involved from April 2010 to October 2011 and the show cause notice issued on 13.9.2012. It was acknowledged that the appellants had indeed paid a higher rate of duty for their inputs during the relevant period. Moreover, there was no allegation of willful suppression or misstatement to evade duty payment. The tribunal concurred with the original authority's finding that there was no malafide intention in availing the alleged excess credit.

5. Consequently, the tribunal found the demand raised invoking the extended period of limitation to be unsustainable. Given the lack of malafide intention and the absence of willful suppression or misstatement, the tribunal dismissed the appeal filed by the department, thereby upholding the decision of the Commissioner (Appeals) to set aside the demand, interest, and penalty.