2018 (8) TMI 1665 - AT - Central Excise

CENVAT credit - excesses and shortages of stock - duty demand along with interest and equal penalty has been imposed under section 11AC of the Act - Time Limitation - Held that - It is very much clear from the records that there was no actual shortage and only was an error in the accounting which was later rectified. Department does not have a case that the appellant has diverted the raw materials - disallowance of credit cannot sustain on merits. Time limitation - Held that - SCN for the period February 2011 has been issued only on 23.4.2015 invoking extended period alleging suppression of facts. There is absolutely no evidence to establish suppression of facts with intent to evade payment of duty. Hence the demand is time-barred. Appeal allowed on merits as well as on limitation.

Summary

Issues:
1. Discrepancy in stock quantities leading to demand and penalties.
2. Allegation of evasion of duty and suppression of facts.
3. Time-barred show cause notice.

Analysis:
1. The case involved a discrepancy in stock quantities of PP granules and MB granules in the ER-1 returns for January and February 2011, leading to a shortage of 7850 Kgs. and 774.5 Kgs. respectively. The original authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals), resulting in the appeal.

2. The appellant argued that the shortage was due to an error in accounting, where excess quantity was erroneously accounted for in December 2010 but rectified in February 2011. The appellant contended that there was no intention to evade duty, as the rectification was made in the accounts, and there was no suppression of facts in the ER6 returns. The appellant also highlighted that the department was informed about the error and rectification through correspondence with the Range Officer. The appellant emphasized that the show cause notice issued in April 2015, for the period of February 2011, was time-barred.

3. The appellate tribunal noted that there was no actual shortage of stock but an error in accounting that was rectified later. It was observed that there was no evidence of diversion of raw materials by the appellant. The tribunal concluded that the disallowance of credit could not be sustained on merits. Additionally, the tribunal found that the show cause notice issued in 2015 alleging suppression of facts was time-barred, as there was no evidence to establish intent to evade payment of duty. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant with consequential relief.