2017 (9) TMI 347 - AT - Central Excise

Non-payment of excise duty - CENVAT credit - case of Revenue is that the cenvat credit cannot be allowed as the appellant have not periodical filed returns - Held that - appellant have produced all the documents before the adjudicating authority such as purchase, invoices etc. In such a situation, the adjudicating authority after verifying the documents should have allowed the cenvat credit which could have been adjusted against the duty demand of the relevant period - the adjudicating authority directed to conduct a proper verification of the cenvat documents and if it is found correct the same should be adjusted against the demand of duty as a consequence the appellant will not be required to pay the duty equal to cenvat credit from cash/PLA - appeal allowed by way of remand.

Summary

Issues: Non-payment of excise duty, utilization of cenvat credit, imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. Non-payment of excise duty: The case involved a company engaged in manufacturing goods falling under Chapter Sub-Heading No. 8504 of the Central Excise Tariff Act, 1985. The appellant was found to have charged excise duty in sales invoices but failed to deposit the excise duty to the government department for a period spanning five years. A notice was issued invoking the extended period under Section 11A(1) of the Central Excise Act, 1944, demanding excise duty amounting to ?35,43,036. The adjudicating authority confirmed the non-payment of excise duty and ordered the recovery of the amount in cash. The appellant contended that they faced labor problems, leading to the delay in payment. However, the tribunal upheld the demand of excise duty, considering it a clear case of suppression of facts by the appellant.

2. Utilization of cenvat credit: The appellant argued that they paid the duty during the investigation and were legally entitled to cenvat credit related to purchases made during the relevant period. The revenue authority contended that since the appellant did not file periodic returns, cenvat credit could not be allowed. The tribunal observed that if the appellant could establish the genuineness of the purchases through documents like purchase invoices and accounting records, the cenvat credit could be adjusted against the duty demand. The tribunal directed a proper verification of cenvat documents to determine the legitimacy of the claim, citing the case of Commissioner of Central Excise Vs. Viraj Alloys Ltd. for support.

3. Imposition of penalty under Section 11AC: The adjudicating authority imposed a penalty under Section 11AC of the Central Excise Act, 1944, which was upheld by the Commissioner (Appeals). The tribunal maintained the penalty, considering the appellant's failure to avail the option of a reduced penalty. It deemed the case as a clear instance of suppression of facts, justifying the penalty under Section 11AC. The tribunal emphasized that the penalty was warranted due to the appellant's failure to declare the collected excise duty to the department.

4. Individual liability for penalty: In a separate appeal filed by the Director of the company, it was established that he was aware of the non-payment of excise duty and the collection of excise duty from customers without remittance. Consequently, he was held liable for a penalty under Rule 26 of the Central Excise Rules. The appeal of the Director was dismissed, affirming his individual liability for the penalty.

In conclusion, the tribunal upheld the demand for excise duty, directed a verification of cenvat credit utilization, and maintained the penalty under Section 11AC while also holding the Director of the company individually liable for penalties under the Central Excise Rules.