2016 (12) TMI 1176 - AT - Central Excise

Clandestine removal of duty paid inputs - Held that - I find that the Department has not brought on any tangible evidence to prove clandestine removal of duty paid inputs by the appellant - On perusal of the statement and the invoices, it reveals that charges of suppression or misstatement cannot be levelled against the appellant. Since the duty alongwith interest was deposited by the appellant on detection of mistake by the Central Excise Audit Wing and before issuance of show cause notice, I am of the view that the case of the appellant is covered under sub-section (2B) of Section 11A ibid, which mandates that on payment of duty alongwith interest, no show cause notice shall be issued and for all practical purpose the matter has to be closed. The explanation appended to Section 11A (2B) ibid will not have any application to the facts and circumstances of the present case since the clandestine motive of the appellant in defrauding the Government revenue has not been substantiated by the Department with the help of any tangible evidence. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Cenvat credit availed without payment of Central Excise duty
- Alleged clandestine removal of goods without issuing Central Excise invoices
- Application of penalty under Section 11AC of the Central Excise Act, 1944

Analysis:
- The appellant, engaged in manufacturing Insulators, availed cenvat credit of Central Excise duty paid on inputs. The Audit Wing observed removal of pig iron and iron scrap without duty payment. Show Cause Proceedings led to a demand of ?1,65,150/- with penalties. The Commissioner (Appeals) upheld the demand, leading to the present appeal.
- The appellant's advocate argued inadvertent error in not issuing Central Excise Invoices, clarifying no intention to defraud revenue. The Director confirmed the mistake. Payment of duty with interest pre-show cause notice was highlighted for Section 11A(2B) benefit.
- The Department, represented by the D.R., cited precedents to justify penalty imposition even if duty is paid post-detection. The Tribunal noted lack of evidence for clandestine removal and the goods were cleared under tax invoices with VAT payment.
- The Tribunal found no evidence of fraudulent intent or suppression by the appellant. Due to duty payment post-error detection and pre-show cause notice, Section 11A(2B) applied, requiring closure of the matter without notice issuance. Precedents cited by the Department were deemed inapplicable due to lack of evidence of clandestine removal in this case.
- Consequently, the Tribunal found no merit in the impugned order, allowing the appeal in favor of the appellant.