2017 (11) TMI 977 - AT - Central Excise

Validity of SCN - whether under the facts and circumstances, the issue of show cause notice is in accordance with the provisions of the CEA? - Held that - the issue of show cause notice is bad and against the provisions of the Act. It has been particularly specified in Section 11 A sub Section 2(B), that where an assessee either on its own motion or on being so pointed out by the Departmental Officers, deposit the tax under intimation to the Department, in such case, no show cause notice be issued. So far the variation in the stock of raw material and finished goods is concerned, admittedly the stocktaking was done by way of estimation and in such manner of stocktaking - the variation of 2% to 3%, as worked out by the Revenue is a normal variation not calling for any adverse inference. The whole show cause notice is untenable and cannot be upheld - appeal allowed - decided in favor of appellant.

Issues:
1. Compliance with provisions of the Central Excise Act regarding show cause notice issuance.
2. Availing Cenvat Credit on items used for factory expansion.
3. Tax liability on Intellectual Property Service received from abroad.
4. Discrepancy in stock verification of raw materials and finished goods.
5. Confiscation of excess stock of finished goods.
6. Failure to discharge Service Tax liability on input services.
7. Demand for Cenvat Credit and penalties.
8. Adjudication of show cause notice and confirmation of demands.

Compliance with Central Excise Act:
The appeal raised concerns about the issuance of the show cause notice in accordance with the provisions of the Central Excise Act. The Tribunal noted that as per Section 11 A sub Section 2(B), if an assessee deposits tax on being pointed out by the Departmental Officers, no show cause notice should be issued. Since the appellant had deposited the tax as pointed out by the Revenue, the Tribunal held that the show cause notice on certain issues was against the Act. Therefore, the Tribunal found the issue of the show cause notice invalid and set aside the impugned order, allowing the appeal with consequential benefits.

Availing Cenvat Credit:
The appellant had availed Cenvat Credit on items used for the expansion of the factory, which were not utilized in the manufacture of final products. The appellant reversed the total amount of the credit on the spot after it was pointed out by the Revenue. The Tribunal noted this discrepancy and the reversal of the credit, indicating compliance with the rectification of the error.

Tax Liability on Intellectual Property Service:
The appellant received Intellectual Property Service from abroad and deposited the tax amount along with interest as calculated by the Revenue. The Tribunal acknowledged the tax payment and compliance with the tax liability on the received service.

Discrepancy in Stock Verification:
During stock verification of raw materials and finished goods, discrepancies were found in the recorded stock quantities compared to the physical verification. The appellant explained that the variation in stock was due to the method of estimation used during verification. The Tribunal found that the variation of 2% to 3% was normal and did not warrant adverse inference, criticizing the Revenue for not allowing for such variations. The Tribunal held that the discrepancies were not substantial and did not justify adverse action against the appellant.

Confiscation of Excess Stock:
Excess stock of finished goods was found during verification, leading to the suspicion of deliberate suppression of production. The excess stock was seized and valued for duty calculation. The Tribunal noted the explanation provided by the appellant regarding the estimation method used for stock verification and found the excess stock confiscation unwarranted, setting aside the order for confiscation.

Failure to Discharge Service Tax Liability:
The appellant failed to discharge the liability towards payment of Service Tax on input services received from overseas providers. The Tribunal acknowledged this failure and the demand raised for the Service Tax liability.

Demand for Cenvat Credit and Penalties:
The Revenue had raised demands for Cenvat Credit, penalties, and confiscation based on various discrepancies and non-compliances. The Tribunal reviewed the demands and penalties, setting aside some penalties imposed by the lower authority and reducing the redemption fine, providing relief to the appellant.

Adjudication of Show Cause Notice:
The show cause notice was adjudicated, confirming the proposed demands and penalties. The appellant appealed the decision, leading to the Tribunal's review and subsequent setting aside of the order based on the invalidity of the show cause notice and the discrepancies found during stock verification.

In conclusion, the Tribunal found certain aspects of the show cause notice and demands raised by the Revenue to be invalid or not substantial enough to warrant adverse action against the appellant. The appeal was allowed with consequential benefits, providing relief to the appellant in accordance with the law.

← Previous Next →