2018 (1) TMI 1122 - AT - Central Excise

Failure to file returns as well as make debit entry in the CENVAT account - intentional mistake or just procedural error - Held that - There was failure on the part of the appellant to make debit entry in the CENVAT account towards discharging duty liability. It is correct that there was sufficient balance during the relevant period in the CENVAT account for discharging the duty liability - Since there was sufficient balance in the CENVAT credit and appellant being a new registrant, it can be safely concluded that the same was only a procedural mistake - the appellant is liable to pay the interest upon the same. Penalty - Held that - since there is no malafide intention to evade payment of duty, the penalties imposed are unwarranted and requires to be set aside. Appeal allowed in part.

Summary

Issues: Failure to file returns and make debit entry in CENVAT account, demand of duty under Section 11A(a) of Central Excise Act, imposition of penalties under Section 11AC and Rule 26(1) of Central Excise Rules, 2002.

Analysis:
1. The appellants started manufacturing activity in November 2007 but failed to file returns and make debit entry in their CENVAT accounts. The department issued a show cause notice demanding duty of ?76,41,283 alleging goods were cleared without payment of duty from November 2007 to 7.2.2008. The Commissioner confirmed the demand, interest, and imposed penalties under relevant sections.

2. The appellant's counsel argued that due to being new to Central Excise procedures, they did not file returns or make debit entries, believing their CENVAT credit was sufficient to cover duty liabilities. The appellant's CENVAT credit details were presented to show their lack of intention to evade payment. The counsel contended that penalties should be set aside due to procedural mistakes and lack of malafide intent.

3. The department's representative reiterated the findings, stating that the appellant issued excise invoices but failed to discharge duty liabilities or file returns, justifying the demand raised as legal. The representative emphasized the appellant's obligation to pay interest on the outstanding amount.

4. The Tribunal noted that the appellant, being a new registrant, made a procedural mistake by not making timely debit entries in the CENVAT account. However, the appellant rectified the mistake before the show cause notice was issued, indicating no malafide intent to evade duty payment. The Tribunal concluded that penalties imposed were unwarranted, setting them aside but confirming the liability to pay interest.

5. The Tribunal allowed the appeal, modifying the impugned order to set aside the penalties imposed on the appellant and the Managing Director. The decision was based on the lack of malafide intent and the rectification of the procedural mistake before the issuance of the show cause notice.