2017 (12) TMI 1153 - AT - Central Excise

Penalty - Wrong availment of CENVAT credit twice - Held that - It is seen that the respondents had wrongly availed cenvat credit of ₹ 17,56,363/-. When the same was detected instead of reversing the credit, they once again took credit resulting in second wrong availment of credit. ₹ 17,56,363/- is not a small amount that the respondents could not have noticed. When instead of reversing the credit, they took it once again, it clearly points to the intention to evade duty as ₹ 35,12,729/- is not a small amount which they could not have noticed - penalty justified. Penalty on the Managing Director of the respondents firm - Rule 26 (2)(ii) of Central Excise Rules read with Cenvat Credit Rules 2004 - Held that - The Order-in-Original points out that the Managing Director had by his statement dated 21.01.2014 stated that ER1 return filed by them indicate that certain amount was reversed in October 2009 on account of wrong credit taken a year back. The said statement was incorrect, and thus his involvement cannot be ruled out - penalty rightly imposed. Refund in respect of duty paid twice - unjust enrichment - Held that - there is no provision under Central Excise Act and Rules allowing suo moto taking of credit or refund without sanction by the proper officer. The appellant s contention that refund in respect of duty paid twice cannot be considered as refund of duty and is only the accounting error does not appeal to us as the debit entry made in the accounts is towards payment of duty only and therefore refund of these amounts has to be considered as refund of duty only - It is seen that at the material time, the respondents were selling the goods on the basis of MRP. In these circumstances, the MRP includes the duty and thus it cannot be held that the respondents had not recovered the duty from the ultimate customer - the adjustment of ₹ 11,59,902/- and ₹ 171,432/- cannot be allowed. The impugned order is set aside and the order in original is restored.

Summary

Issues:
1. Adjustment of duty excess paid against demand and dropping of penalties.
2. Permissibility of setting off duty wrongly paid on exempted goods.
3. Justification of penalty imposition for wrong availment of credit.
4. Responsibility of Managing Director in clerical error.
5. Allowance of adjustment of duty excess paid based on unjust enrichment.
6. Examination of limitation in allowing the adjustment of excess duty paid.
7. Refund claim procedure and unjust enrichment doctrine applicability.

Analysis:
1. The appeal was filed by the revenue against the Commissioner (Appeals) order allowing adjustment of duty excess paid against the demand and dropping of penalties. The revenue contended that the respondents had wrongly availed cenvat credit, resulting in a significant amount of excess credit. The revenue argued that the adjustment was impermissible based on the decision of the Larger Bench in BDH Industries Ltd. The respondents claimed the wrong availment was a clerical error, citing the decision in Yamuna Gases & Chemicals allowing such adjustments. The Tribunal found the penalty imposition justified due to the intentional evasion of duty by the respondents.

2. The Tribunal examined the role of the Managing Director in the clerical error, with the Order-in-Original pointing out discrepancies in the director's statements. The Tribunal upheld the penalty on the Managing Director, stating that his involvement could not be ruled out based on the incorrect statements provided.

3. Regarding the allowance of adjustment of duty excess paid, the Commissioner (Appeals) relied on the decision in Yamuna Gases & Chemicals, while the revenue cited the decision of the Larger Bench in BDH Industries Ltd. The Tribunal noted that the issue of unjust enrichment was considered, but the limitation aspect was not examined. It was observed that the respondents were selling goods based on MRP, which included duty, indicating the duty was recovered from customers. The Tribunal found that the adjustment of excess duty paid was barred by limitation and could not be allowed.

4. The Tribunal highlighted the need for refund claims to pass through Section 11B of the Central Excise Act and adhere to the doctrine of unjust enrichment, as clarified by previous court decisions. The Commissioner (Appeals) was criticized for not examining the reversal of extra cenvat credit by the respondents and the refundability of the amount. Consequently, the Tribunal set aside the impugned order and restored the order in the original, disposing of the cross objection as well.