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2018 (5) TMI 1205 - AT - Central ExciseCENVAT credit - it was found that the appellant had not reversed the CENVAT credit under Rule 6(3) on the exempted goods - What is the meaning of expression which are exempt from the duties of customs under rule 6(6)(vii) of CENVAT Credit Rules, 2004 does it include only goods which are fully exempted or it also includes the goods which are partially exempted from the customs duty? - is the appellant required to reverse the credit as per Rule 6(3) of CENVAT credit Rules? Held that - The harmonious interpretation of the expression goods which are exempted from duties with the remaining part of the scheme of CENVAT credit rules would require one to interpret as the goods which are fully exempted from duty. Hence, even 2.5% duty of customs will not make the goods which are exempted from duty - the appellant is not exempted from reversing the credit as per Rule 6(3) of CENVAT Credit Rules. Whether the assessee has resorted to fraud, wilful misstatement, suppression of facts or violation of any condition of the Act or Rules, with an intent to avoid payment of duty? - Held that - it is evident that the assessee had declared both the fact that they have availed the exemption notification and also that they have not reversed any CENVAT credit, in their ER-I returns filed with the department. I do not find that they have suppressed any facts or misstatement or violated any act of Rules with an intent to evade payment of duty. It appears that the Officer who scrutinised the returns, has not pointed out that they have not reversed the credit and only audit discovered and pointed it out - the extended period limitation is not invokable in this case - the penalty u/r 15(2) of CENVAT Credit Rules 2004 read with Section 11 AC does not survive. The amount of interest under rule 14 of CENVAT Credit Rules 11AA also gets reduced correspondingly. Appeal allowed in part.
Issues:
1. Interpretation of expression "which are exempt from the duties of customs" under Rule 6(6)(vii) of CENVAT Credit Rules, 2004. 2. Allegation of fraud, wilful misstatement, or suppression of facts by the appellant. 3. Liability of the appellant to pay interest and penalty. Issue 1: Interpretation of Rule 6(6)(vii): The case involved manufacturers of hydraulic/fluid couplings who availed credit under CENVAT Credit Rules, 2004 but failed to reverse the credit on exempted goods. The dispute centered on whether the exemption under Rule 6(6)(vii) applied to partially exempted goods subject to 2.5% BCD. The Tribunal analyzed the meaning of "goods exempted" within the CENVAT scheme, concluding that full exemption is required for CENVAT credit eligibility. Partial exemption does not qualify, aligning with the scheme's intent to deny credit on goods fully exempted. The Tribunal's interpretation was based on the legislative intent and scheme of the CENVAT Credit Rules. Issue 2: Allegation of Fraud or Misstatement: The appellant contested the imposition of penalty and interest, arguing lack of wilful suppression or violation of rules. The Tribunal found the appellant's compliance evident from their filed returns, where they declared availing the exemption but not reversing CENVAT credit. The audit, not the appellant, identified the oversight, indicating no fraudulent intent or wilful misstatement. Consequently, the extended limitation period was deemed inapplicable, leading to the dismissal of penalties under Rule 15(2) and Section 11 AC. The interest amount was also reduced accordingly. Issue 3: Liability for Interest and Penalty: The Tribunal's decision partially allowed the appeal, modifying the Order-in-Appeal to reflect the appellant's compliance with the CENVAT Credit Rules. The ruling emphasized the importance of accurate reporting in returns and the lack of fraudulent behavior. Ultimately, the appellant was not held liable for interest and penalties due to the absence of intentional wrongdoing or violation of regulations. In conclusion, the Tribunal's judgment clarified the interpretation of exemption under Rule 6(6)(vii), addressed allegations of fraud or misstatement by the appellant, and determined the liability for interest and penalties based on the compliance and intent demonstrated by the appellant in their filings and actions.
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