2018 (3) TMI 750 - AT - Central Excise

CENVAT credit - duty paying documents - supplementary invoices - Rule 9(1)(b) of Central Excise Rules, 2004 - Held that - this is not the case of clandestine removal with intent to evade payment of duty. Appellant s Hinjewadi unit cleared the goods on payment of duty, short payment is only due to the wrong calculation of costing. This does not mean that appellant s Hinjewadi unit intentionally suppressed the value to evade duty - It is also observed that both the unit belong the same company of the appellant therefore whatever duty is paid or payable by their HInjewadi unit was available as Cenvat credit to the appellant therefore due to this revenue neutrality intention to evade excise duty is not established. The settlement commissioner has taken very lenient view on imposing penalty which further proves that there is no malafide intention to evade payment of duty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit
- Allegations of suppression of facts
- Revenue neutrality and intent to evade payment of duty
- Settlement commission's decision and penalty imposition

Disallowance of Cenvat credit:
The appeal was against an Order-in-Appeal where the Revenue's appeal was allowed against an Order-in-Original which dropped the disallowance of Cenvat credit amounting to ?9,25,387. The dispute arose from the availing of credit based on supplementary invoices issued by the appellant's Hinjewadi Unit. The Revenue alleged suppression of facts due to duty payment only after a departmental officer pointed out the short payment, citing Rule 9(1)(b) of Central Excise Rules, 2004.

Allegations of suppression of facts:
The appellant's counsel argued that there was no suppression of facts as the short payment was a result of improper calculation by the Hinjewadi Unit, which rectified the error by paying the amount and issuing a supplementary invoice. It was emphasized that the transaction was a stock transfer within the same company, ensuring revenue neutrality. The counsel cited various judgments to support the argument that intent to evade payment of duty cannot be alleged in cases of revenue neutrality.

Revenue neutrality and intent to evade payment of duty:
The Member (Judicial) analyzed the case and concluded that the appellant's Hinjewadi Unit did not engage in clandestine removal to evade duty. The unit paid the duty based on its own costing method, later rectifying the error as per the department's contention. The judgment highlighted that the duty paid by the unit was available as Cenvat credit to the appellant, establishing revenue neutrality and negating any intention to evade excise duty.

Settlement commission's decision and penalty imposition:
Regarding the settlement commission's involvement, it was noted that the Hinjewadi Unit settled a case involving a total duty of ?75.62 lakhs, with a token penalty of ?1.5 lakhs imposed. This lenient penalty imposition indicated no malicious intent to evade duty payment. The Member (Judicial) disagreed with the lower authority's contention that the settlement commission's penalty imposition implied suppression of facts, as the commission did not explicitly find any suppression. Consequently, the impugned order was set aside, and the appeal was allowed based on the lack of grounds to deny Cenvat credit to the appellant.