2017 (5) TMI 180 - AT - Central Excise

Refund claim of credit already reversed - irregularly availed CENVAT credit - whether removal of inputs/capital goods or for that matter inputs/capital goods which were removed from the factory by assessee, had been done on reversal of modvat credits as liable and whether in respect of other impugned goods, they had indeed been released for manufacturing process or otherwise lying unused in the factory premises for reasons of obsoleteness? Held that - Both sides agree that the quantum of inputs and capital goods are very huge in number and consequently, the connected documents/records thereof are also voluminous. This forum definitely does not have wherewithal to examine all these documents individually and in detail to prove or disprove assertions of the assessee/Revenue. 14. It would therefore in the fitness of things that the matter is remanded back to the original authority involved in these three appeals for causing such verification afresh - It is further made clear that since refund claims are allowed in the earlier proceedings totaling to around ₹ 12 lakhs and the assessee has not pressed for the balance amount of ₹ 14,12,184/-, the second amount will also be considered as not being contested with to the demand preceding the case - appeal allowed by way of remand.

Issues Involved:
1. Legitimacy of Cenvat credit availed by the assessee.
2. Validity of refund claims made by the assessee.
3. Imposition of penalty and interest on the assessee.
4. Allegation of suppression of facts by the assessee.
5. Compliance with procedural requirements in adjudicating the refund claims.

Issue-wise Detailed Analysis:

1. Legitimacy of Cenvat Credit:
The department conducted a selective audit of the assessee for the period April 1997 to September 1998, revealing discrepancies in the availment of Cenvat credit amounting to ?17,19,850/-. The assessee paid this amount, partly through PLA and partly through RG-23A Account. However, the assessee later contested the quantum of the alleged irregular credit and filed refund claims for ?10,77,586/- and ?1,78,157/-, while not pressing for the balance amount. The department issued show-cause notices (SCNs) proposing to reject part of the refund claims, which were confirmed by the original authority. The Commissioner (Appeals) allowed the assessee's appeal and dismissed the department's appeals, leading to further appeals by the department.

2. Validity of Refund Claims:
The assessee argued that they had debited the Modvat credit for inputs/capital goods removed from the factory for reasons like field service and R&D, and filed refund claims only for amounts they could substantiate with documents. The department, however, contended that the Commissioner (Appeals) did not properly verify whether the credits for the goods taken out were reversed at the time of removal. The Tribunal noted that the issue boils down to whether the assessee has evidence to support their assertion that there was no irregular removal or availment of Modvat credit. The Tribunal remanded the matter back to the original authority for fresh verification of the refund claims.

3. Imposition of Penalty and Interest:
The Commissioner (Adjudication) confirmed the demand of ?26,67,927/- and imposed a penalty of ?25 lakhs on the assessee. The Tribunal in its earlier order set aside the penalty and interest, citing that the duty was paid before the issuance of the SCN, following the ruling of the apex court. However, the High Court of Madras remanded the matter back to the Tribunal, directing it to reconsider the issue of mandatory penalty in light of relevant decisions and Notification No.14/96-CE (NT).

4. Allegation of Suppression of Facts:
The department alleged suppression of facts by the assessee, justifying the invocation of the extended period for demand and imposition of penalty under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944. The assessee countered that there was no intention of fraudulent availment of credit, and the discrepancies were due to the voluminous nature of their records. The Tribunal directed the original authority to consider whether there was willful suppression in the matter during the de novo adjudication.

5. Compliance with Procedural Requirements:
The Tribunal observed that the Commissioner (Appeals) had not provided adequate reasons for allowing the refund claims and relied on the ERP system documents without proper verification. The High Court also noted that the Tribunal's earlier order dismissing the department's appeals was non-speaking and lacked analysis. The Tribunal remanded the matter for de novo consideration, directing the original authority to give the assessee an opportunity to present additional submissions and evidence, and to address all contentions made by both parties.

Conclusion:
The Tribunal remanded the appeals to the original authority for fresh adjudication, directing that the refund claims be considered first, as their outcome would impact the demand for irregularly availed Modvat credit. The original authority was instructed to verify the supporting documents and consider all arguments made by the assessee and the department, including the issue of suppression and the applicability of penalties and interest.

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