2018 (8) TMI 321 - HC - Central Excise

Clandestine removal - Held that - The finding of the Tribunal that the Commissioner (Customs and Excise) has recorded a finding that M/S LIPL has made payment of Central Excise Duty which they had recovered from the customers is incorrect and run contrary to the record and order passed by the commissioner - The Commissioner as is evident from his order has also held that M/s LIPL had availed the Cenvat credit on raw material in violation of Rule 3/(3)/ 3(4) of the Cenvat Credit Rules 2002/2004 for the amount of Central excise duty they had collected from their customers. The Commissioner (Customs and Excise), Noida had confirmed the demand of ₹ 8,45,11,283.00/- which was charged and collected by M/s LIPL as Central excise duty from their buyers under Section 11D of the Act and interest thereon under Section 11DD of the Act - The findings of the Tribunal are, thus, wholly incorrect, against the record and unsustainable. Matter remanded back to the Tribunal to decide afresh - appeal allowed by way of remand.

Issues Involved:
1. Demand of ?8,45,11,283.00 collected as Central Excise Duty under Section 11D of the Central Excise Act.
2. Demand of ?15,68,167.00 as Cenvat Credit on exported metallized Polyester film under Rule 12/14 of the Cenvat Credit Rules.
3. Demand of ?75,80,380.00 as Excise duty on Polyethylene film consumed captively for lamination under Section 11A(1).
4. Demand of ?14,70,682.00 as Cenvat credit on clandestinely cleared Laminated film under Rule 12/14 of the Cenvat Credit Rules.
5. Demand of ?3,90,734.00 as Cenvat credit on clandestinely cleared processed goods under Rule 14 of Cenvat Credit Rules.
6. Imposition of penalty on M/s LIPL under Rule 13/15 of the Cenvat Credit Rules and Rule 25 of the Central Excise Rules.
7. Imposition of penalty on the Directors and Manager of M/s LIPL under Rule 13/15 of the Cenvat Credit Rules and Rule 26 of the Central Excise Rules.

Detailed Analysis:

Issue 1: Demand of ?8,45,11,283.00 Collected as Central Excise Duty
The Commissioner (Customs and Excise), Noida found that M/s LIPL collected ?8,45,11,283.00 as Central Excise Duty from their buyers on metallized Polyester film and Laminated films. However, as the process of metallization/lamination did not amount to 'manufacture' under Section 2(f) of the Central Excise Act, no duty was payable on these products. Consequently, the collected amount was required to be credited to the Central Government under Section 11D of the Act along with interest under Section 11DD.

Issue 2: Demand of ?15,68,167.00 as Cenvat Credit on Exported Metallized Polyester Film
The Commissioner held that M/s LIPL availed Cenvat credit on metallized Polyester film cleared for export, despite no duty being payable on the final products. This credit was utilized towards payment of amounts charged as Central Excise Duty, which was against Rule 12/14 of the Cenvat Credit Rules 2002/2004. The amount of ?15,68,167.00 was thus demandable along with interest under Section 11AB, and M/s LIPL was liable for a penalty under Section 11AC.

Issue 3: Demand of ?75,80,380.00 as Excise Duty on Polyethylene Film Consumed Captively
The Commissioner determined that M/s LIPL manufactured and consumed Polyethylene film for lamination without paying duty, which was demandable under Section 11A(1) along with interest under Section 11AB. M/s LIPL was also liable for a penalty under Section 11AC for this contravention.

Issue 4: Demand of ?14,70,682.00 as Cenvat Credit on Clandestinely Cleared Laminated Film
The Commissioner found that M/s LIPL cleared Laminated film clandestinely without paying the Cenvat credit involved. This amount of ?14,70,682.00 was demandable under Rule 12/14 of the Cenvat Credit Rules 2002/2004 along with interest under Section 11AB, and M/s LIPL was liable for a penalty under Section 11AC.

Issue 5: Demand of ?3,90,734.00 as Cenvat Credit on Clandestinely Cleared Processed Goods
The Commissioner noted that M/s LIPL clandestinely cleared processed goods (Laminates in rolls and Metallized Polyester film) without paying the Cenvat credit involved. This amount of ?3,90,734.00 was demandable under Rule 14 of the Cenvat Credit Rules 2004 along with interest under Section 11AB, and M/s LIPL was liable for a penalty under Section 11AC.

Issue 6: Imposition of Penalty on M/s LIPL
The Commissioner imposed penalties on M/s LIPL under Rule 13/15 of the Cenvat Credit Rules 2002/2004 and Rule 25 of the Central Excise Rules 2002 for contraventions of various provisions of the Central Excise Act/Rules.

Issue 7: Imposition of Penalty on the Directors and Manager of M/s LIPL
Penalties were also imposed on the Directors and Manager of M/s LIPL under Rule 13/15 of the Cenvat Credit Rules 2004 and Rule 26 of the Central Excise Rules 2002.

Conclusion:
The Tribunal's finding that M/s LIPL had made payment of the Central Excise Duty collected from customers was incorrect and contrary to the record. The Commissioner had specifically found that M/s LIPL unlawfully collected excise duty without any authority and failed to pay it to the Government. The High Court set aside the Tribunal's judgment and remanded the matter back to the Tribunal for a fresh decision within three months.

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