2018 (7) TMI 1589 - AT - Central Excise

Benefit of N/N. 1/2011-CE dated 01.03.2011 - availability of CENVAT Credit on inputs and utilization of the same by beneficiary of the notification - demand of Interest and penalty - Held that - The appellants have complied with all the necessary statutory returns within the stipulated time and the fact of claiming exemption benefit was disclosed in the ER-1 returns filed during the relevant period. It is also not in dispute that the appellants paid the entire duty amount through the CENVAT Account and thereafter, through the current account, thereby, causing no loss of Revenue to the exchequer. The mistake seems to be that of procedural and irregularities - the subsequent payment in cash was the only action by which procedural irregularities could be rectified. The appellant has made out a case for non-imposition of penalty and also for setting aside the demand of interest - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Interpretation of Notification No. 1/2011-CE and subsequent amendments
- Payment of Central Excise duty from CENVAT Account vs. Current Account
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944
- Compliance with statutory returns and disclosure of exemption benefit
- Allegations of fraud, collusion, willful misstatement, and suppression of facts
- Rectification of procedural irregularities through subsequent cash payment
- Liability for interest and setting aside the demand for interest

Analysis:

Interpretation of Notification No. 1/2011-CE and subsequent amendments:
The appellant, engaged in manufacturing Sulphuric Acid and Super Phosphate, cleared goods under Notification No. 1/2011-CE but faced a Show Cause Notice for allegedly using CENVAT Credit for duty payment instead of the Current Account. The dispute revolved around the applicability of the notification and the correct payment mechanism.

Payment of Central Excise duty from CENVAT Account vs. Current Account:
The Revenue argued that duty payment under the notification should be made from the Current Account, not through CENVAT Credit. The appellant contended that they paid the duty amount by cash after receiving the Show Cause Notice, regularizing the duty payment.

Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The adjudicating authority imposed a penalty under Section 11AC, alleging non-compliance with payment procedures. The appellant argued against the penalty, stating that there was no intent to evade duty payment and that procedural irregularities were rectified promptly.

Compliance with statutory returns and disclosure of exemption benefit:
The appellant maintained that they filed statutory returns correctly, showing duty payment from the CENVAT Account. The appellant's compliance with necessary returns and disclosure of exemption benefits were crucial aspects in the case.

Allegations of fraud, collusion, willful misstatement, and suppression of facts:
The Tribunal analyzed whether there was any evidence of willful misstatement, fraud, or suppression of facts by the appellant to evade duty payment. The absence of such elements influenced the decision on penalty imposition.

Rectification of procedural irregularities through subsequent cash payment:
The Tribunal acknowledged that the appellant rectified procedural irregularities by paying the duty amount in cash promptly after receiving the Show Cause Notice. This rectification was a significant factor in determining the outcome of the case.

Liability for interest and setting aside the demand for interest:
The Tribunal considered the liability for interest, concluding that interest was not applicable due to the appellant's bonafide belief in paying duty through the CENVAT Account. Consequently, the demand for interest was set aside, and the penalty was not upheld.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant based on the analysis of various legal and procedural aspects of the case.